Last week, Energy and Petroleum Regulatory Authority (EPRA), released it’s monthly review on fuel prices. The review showed a sharp increase on pump prices as follows;
- Super petrol price went up by KES 8.99 to KES. 186.31
- Diesel went up by KES 8.67 to KES 171.57
- Kerosene went up by KES 9.65 to KES 156.58
This price release by EPRA is inclusive of 16% value added tax (VAT) in adherence to the provisions of finance act 2023, the tax laws amendments act of 2024 and revised rates for excise duty adjusted for inflation as per legal notice of No.194 of 2020.
During the announcement, EPRAs director general, Daniel Kiptoo said the fuel price surged because of the increased landing cost of imported fuel.
EPRA’s part is to buffer public interest by ensuring prices are fair in the energy and petroleum sectors by making price adjustments, monitoring market activities and encouraging fair competition. This role considers both consumer affordability and sustainable supply. However, the outlook of EPRAs role currently seem to suggest otherwise.
This week’s sharp increase in fuel price placed a heavy burden on the consumer as many economic activities heavily rely on fuel for operations; product transportation requires fuel and this directly affects food prices.
Owing to the fact that oil is a widely traded commodity across the globe, this directly affects it’s price shifts due to the interplay of it’s demand and supply. Geopolitical factors also contributes to it’s price fluctuations. This notwithstanding, EPRAs sharp fuel price increment doesn’t reflect global oil prices as they remain largely stable.
Kenya being an oil net importing country, tax policy becomes an effective tool for shielding consumers from volatile fuel prices. Heavy taxes on fuel demotivates production by inflating input costs. This leads to high consumer price and inflationary tension consequentially stifling Kenya’s competitiveness regionally.
Currently, fuel cost majorly includes taxes which is destructive economically. Incorporating policy options like rectifying the tax and levy imposed on fuel will relieve direct pressures on cost. Additionally, having a strategic fuel stabilisation fund to shield against increases in prices will help mitigate inflation.
Investing in alternative sources of energy will also help stabilize fuel prices by creating a wider supply of energy. Having transparent indexation mechanisms that link pump prices to global benchmarks will boost confidence on EPRAs role in the energy sector.
Finally, incorporating the listed recommendations timely, will lift up the adverse impact caused by high fuel priced and ensure market agility to cope with global market tensions.
