14th February 2017

PUMP PRICES REVIEW FOR FEBRUARY - MARCH 2017

The regulated prices of three main petroleum products will increase from 15th February 2017 following today’s price review by the Energy Regulatory Commission (ERC).

The increase in retail pump prices is driven by an upswing in the prices of refined petroleum products, a trend amplified by a slight depreciation of the exchange rate between the Kenya Shilling and the U.S. dollar.

The price of crude oil in world markets increased 20 per cent between November 2016 and January 2017. This led to an increase in the prices of refined petroleum products. As explained in the past, there is a correlation between crude oil prices and the prices of refined products, but the relationship is not linear. In the recent case, prices of refined petroleum products in world markets over the same period increased by between 14% and 17%.

Accordingly, as Kenya imports 100% of its requirements for refined petroleum products, the applicable pump prices for the period 15th February 2017 to 14th March 2017 have been affected. This is primarily so because the petroleum cargoes used in this month’s computation were procured in December 2016 and January 2017. It’s worth noting that under the Open Tender System (OTS) through which our petroleum cargoes are procured, it takes 30 to 45 days between placing an order and delivery of the cargo. 

Considering the weighted average costs of imported refined cargoes, the overall result is that the maximum allowed price of Super Petrol increases by KShs 4.26 per litre, that of Diesel increases by KShs 5.03 per litre, while that of Kerosene increases by KShs 3.75 per litre.

The cost components included in the current review are:

  1. The landed costs of imported refined products;
  2. Taxes and levies;
  3. Supplier margins; and
  4. Distribution costs.

The main cost driver in petroleum pump prices is the landed cost. In comparison with last month, the landed cost of Super Petrol increased by 8.45% from US$ 530.24 per ton to US$ 575.06 per ton; Diesel increased by 12.07% from US$ 446.84 per ton to US$ 500.78 per ton and Kerosene increased by 7.44% from US$ 487.91 per ton to US$ 524.20 per ton.

Furthermore, petroleum products imported into Kenya are paid in US Dollars. For the costs to be incorporated in the pricing formula, an exchange rate is used to convert the US Dollar component into Kenya Shillings. As a result, when the Shilling depreciates against the US Dollar, more shillings would be required to purchase a given volume of product making the final cost higher. The converse happens when the Shilling appreciates.

Consequently, any change in the international prices is incorporated into the local pump price by taking account of the prevailing exchange rate. In this month’s computation we have used an average exchange rate of KShs 103.88 per US Dollar as compared to KShs 102.41 per US Dollar that was used in January 2017. This marks a currency depreciation of 1.44% in the period under review. Supplier Margins, Distribution costs, Taxes and Levies have remained unchanged.

A table of petroleum pump prices for all Kenyan towns can be downloaded here (PDF, 80KB).