Petroleum prices are set to increase following a raft of measures by Treasury in the Finance Bill, 2016 as road maintenance levy goes up by Sh6 starting midnight. The Energy Regulatory Commission (ERC), which is set to release its prices today, will be required to include the gazetted additions in its monthly formulae, which is bound to increase the cost of living for Kenyans.
To curb adulteration of diesel, the government also increased the cost of kerosene last month by reintroducing a Sh7.205 excise duty per litre. Globally, there was a noticeable increase in fuel prices between May and June where price of petroleum products increased by almost 3.3 per cent.
The cost of refined products such as kerosene and diesel increased by between six and 6.4 per cent in that period while super petrol remained stable—at a time the shilling was stable at about 101 against the dollar. In last month’s ERC guidelines, the price of super petrol shot up by Sh1.92 a litre, diesel by Sh3.34 per litre and kerosene Sh3.82 coupled with the Sh7.205 excise duty.
“This was a consequence of the average landed cost of imported super petrol by 3.64 per cent from $472.95 (Sh47,672) per tonne in April 2016 to $490.18 per tonne in May 2016,” said ERC said.
The cost of fuel has increased significantly since January after historical dips in international prices last year when the price of crude oil hit $29.95 (Sh49,508) per barrel. By March there was resurgence in the price of crude oil in the international market, with a barrel trading at $40 (Sh4,040) per barrel which influenced subsequent pricing of petroleum products.
ERC has previously warned that while the drop in crude oil prices contributes to the local pump prices, the relationship between the two is not linear and that a host of other factors influence the final price of oil. In estimating the cost, ERC first considers the landed cost of the imported product.
To get the wholesale price the commission adds excise duty, road maintenance, petroleum development and regulatory levies and Kipevu Oil Storage Facility charges.
Other considerations are losses at the depots, Kenya Pipeline Company charges and profit margin for the wholesalers. To calculate the retail prices, the retail profit margin and the transportation costs from the nearest depot are then introduced in the formulae to get the cost of fuel in various towns.