Why Did Petrol And Diesel Prices Remain Steady Despite Lower Global Prices?

The Energy and Petroleum Regulatory Authority (EPRA) announced in its latest monthly press release that fuel prices in Kenya will remain largely unchanged for the period between September 15 and October 14, 2024.

Both petrol and diesel prices will hold steady, while kerosene prices will see a slight reduction of KES 3.43 per litre. This decision has brought some relief to kerosene users, while the rest of the consumers brace for consistent costs at the pump.

In Nairobi, the new retail prices stand at KES 188.84 for petrol, KES 171.59 for diesel, and KES 158.32 per litre for kerosene. Despite reductions in landed costs, as well as in distribution and storage expenses, the government has opted to utilize the Price Stabilization Fund to keep petrol and diesel prices steady. This move ensures that Kenyan households and businesses will not face abrupt price hikes, particularly at a time when fuel costs weigh heavily on the national economy.

EPRA’s announcement aligns with global market trends that have seen a notable dip in international petroleum prices. The Platts, a price benchmark used to gauge international fuel prices, showed a significant reduction—7.4% for petrol and 6.2% for both diesel and kerosene. Additionally, Kenya experienced a modest currency appreciation against the US dollar, with the exchange rate improving by 1.1%. These combined factors helped reduce the cost of fuel imports.

The government’s decision to maintain stable fuel prices is strategic, especially during a period of declining global oil prices. By utilizing the Price Stabilization Fund, they have shielded consumers from sudden price increases. However, this raises an interesting point about future fuel pricing trends. If international oil prices continue their downward trajectory, the reliance on the Price Stabilization Fund may decrease. In such a scenario, the government may seize the opportunity to replenish the fund, ensuring that it remains a viable tool for future market uncertainties.

Looking ahead, EPRA anticipates that fuel prices will remain stable, closely following global market conditions. Although no significant fluctuations are expected in the near term, market dynamics can shift quickly. The government’s prudent use of the Price Stabilization Fund has provided a buffer, ensuring that Kenyans are not left vulnerable to erratic price spikes. However, as the global market evolves, we may witness further adjustments that could benefit the country both in terms of price stability and fund management.

The continued stability of fuel prices will be a welcome relief for many sectors of the economy, particularly those that are heavily dependent on petrol and diesel. With the international market offering a respite and the government’s intervention keeping prices in check, Kenyans can expect a period of relative calm at the pumps. Nonetheless, it remains to be seen how long this stability will last and whether the government’s intervention through the Price Stabilization Fund will eventually be phased out in favor of more market-driven pricing.

Read Also: August 2024 Consumer Prices: Inflation Ticks 4.4% As Fuel Outpaces Food Prices