oil prices

Global oil prices have plummeted to their lowest point in the past five months, sending shockwaves through international energy markets. 

As a result, the Energy and Petroleum Regulatory Authority (EPRA) of Kenya have swiftly responded to this global downturn by announcing an increase in local fuel prices. 

This decision comes amidst a complex web of factors impacting the fuel market, including a weakened Kenyan currency, a surge in the landed cost of oil, the introduction of new Value Added Tax (VAT) on fuel, increased taxes, and a fluctuating ksh to usd exchange rate.

EPRA’s adjustment in fuel prices, exemplified by September 2023 increases of Sh16.96 for Super Petrol, Sh21.32 for Diesel, and Sh33.13 for Kerosene, highlights the delicate balance between global oil dynamics and local regulatory measures. 

The Kenyan public now grapples with the ripple effects of these decisions, with fuel prices becoming increasingly sensitive to shifts in international markets and currency valuations. 

As consumers and industries adapt to the new pricing landscape, the spotlight remains on the intricate connections between global Platts prices, exchange rates, and domestic fuel regulations.

The Energy and Petroleum Regulatory Authority (EPRA) of Kenya plays a crucial role in reviewing fuel prices on the 14th of each month. Their decision-making process involves assessing various factors, including global oil market conditions, currency valuations, and supply-demand dynamics. EPRA then either maintains current prices or announces adjustments, with the new prices taking effect in the following month.

The volatility of the Kenya Shilling against major currencies, particularly the US Dollar, also has a profound impact on fuel pricing. Exchange rate fluctuations directly influence the cost of imports and the value of exports in Kenya, creating a ripple effect on fuel prices. 

As of December 8, 2023, the exchange rate stands at 1 United States Dollar equals 153.40 Kenyan Shilling (USD/KES), highlighting the current economic context.

The recent decline in global oil prices stems from multiple factors, including concerns over diminishing demand, a strengthened U.S. dollar, uncertainties surrounding OPEC+ announced voluntary supply cuts, and worries about abundant oil supplies. This confluence of issues has triggered a significant downturn in the international oil market, impacting economies and industries worldwide.

S&P Global Platts benchmark prices serve as a pivotal reference point in the fuel industry, influencing both physical and financial contracts. 

Understanding Global Platts Prices is essential for various reasons: facilitating competitive trading, identifying patterns, analyzing pricing trends, recognizing market characteristics, and ensuring alignment with other market participants. 

This knowledge empowers stakeholders to make informed decisions in a transparent and dynamic global market, ultimately impacting local fuel prices and the broader economic landscape.

Several historical events have shaped fuel price adjustments, reflecting the intricate relationship between global and local economic conditions. 

READ ALSO: KRA’s Taxing Dilemma: Why has beer consumption declined In kenya

Key events include the Arab oil embargo in the 1970s, the First Gulf War in the 1990s, the Great Recession of 2007-2009, and the 2020 crisis. Notably, the 2008 and 2009 recession resulted in decreased consumption, leading to lower prices for crude oil and refined products. However, by 2010, increased consumption contributed to a rebound in fuel prices.

A comparative analysis reveals the dynamic nature of oil price fluctuations and their responses to historical events. For instance, during the 2008 recession, crude oil reached an all-time high of $147.27 per barrel. 

In contrast, as of November 24, 2023, the current price of WTI crude oil stands at $75.57 per barrel. Examining these instances provides insights into the resilience and adaptability of the fuel market in response to economic challenges.

Petrol pricing holds particular significance in the Kenyan market due to its direct impact on the cost of living. The regular increase in fuel prices has contributed to a higher cost of living, rendering basic commodities unaffordable for many Kenyans. 

Moreover, the surge in fuel costs has elevated transportation expenses, particularly for consumer goods, intensifying financial burdens on citizens and exacerbating poverty.

Leave a Reply

Your email address will not be published. Required fields are marked *