Update: Energy CS Davis Chirchir has since clarified that his statement on the possible increase in fuel prices was based on an analysis by the Financial Times and was dependent on the escalation of the Israel-Palestine conflict. He noted that the situation has so far not reached there and was hopeful the cost of a barrel of oil would not reach $150.
Kenyans could soon pay up to Ksh300 per litre of petrol in the next monthly price review, according to Energy Cabinet Secretary (CS) Davis Chirchir.
Chirchir noted that the Israel-Palestinian conflict was likely to further destabilise international fuel prices which would have a ripple effect on the cost of fuel in Kenya.
The CS spoke before the National Dialogue Committee (NADCO) on Monday, November 6 to respond to questions regarding how his Ministry would protect Kenyans from more fuel price hikes which could worsen the cost of living in the country.
“Because of the Hamas and Israeli War, the international prices could go up to USD150 (Ksh22,696) and that would literally mean our products going to a high of Ksh300 at the pump,” he told the committee that is co-chaired by Kalonzo Musyoka and Kimani Ichung’wa.
The increase would likely hurt Kenyans as well as businesses and manufacturers already feeling the heat due to the high cost of commodities occasioned by the high cost of living.
On November 14, the Energy and Petroleum Regulatory Authority (EPRA) announced what is effectively the highest fuel prices in the country’s history with Super Petrol retailing at Ksh217.36 in Nairobi. Diesel and Kerosene retail at Ksh217.36, Ksh205.47, respectively.
Stakeholders in the fuel industry have noted that the government’s decision to increase VAT on fuel prices has worsened an already dire situation.
Effective July 1, the government increased VAT on fuel from 8 per cent to 16 per cent, pushing up the price of the commodity to record highs of above Ksh200.
During the last review on October 14, EPRA explained that the increase in monthly fuel prices was a result of an increase in landing costs.
The authority also considered the Petroleum Development Levy (PDL) in the October price calculations, meaning the price of Super Petrol was to increase by Ksh8 if the prices were not subsidised.
"From the calculations, Super Petrol had been projected to increase by Ksh8.79/litre, Diesel by Ksh16.12/litre and Kerosene by Ksh12.05/litre," EPRA added.
Normally, an increase or decrease in fuel prices has a ripple effect on various sectors of the economy, with an increase in fuel prices triggering an increase in the cost of electricity, matatu fares, food, transportation and logistics sectors, which are important for the distribution of goods countrywide.
Kenya imports all its petroleum product requirements in refined form, which makes the country susceptible to any changes in global oil prices and international market dynamics.
President William Ruto’s government did away with the subsidies that were meant to keep the cost of fuel down and imposed higher taxes on the product, which has led to intense criticism from citizens lamenting the high cost of living.
Furthermore, a harsh economy has also led to companies freezing job hiring and imposing salary cuts to survive the tough environment, as well as businesses downscaling operations or closing down altogether.