According to the East African news publication, a liter of super petrol will cost $1.39 in Nairobi, up from $1.42, while diesel will cost $1.31, down from $1.33 in the new monthly cycle, which ends on January 14, next year. The drop in fuel prices should give some economic relief to Kenyan consumers. The East African powerhouse will experience its largest margin drop in fuel prices since 2021.
Back in 2021, Kenyans also had a similar situation with super petrol prices going from $0.88 to $0.85 for a liter, while diesel went down $0.72 from $0.75.
The decline in the prices of fuel is attributed to a set of factors. The primary drive is undeniably the drop in crude oil prices, which has been happening since October 2023. Indeed, concerns about a potential recession have dampened demand for oil, leading to lower prices. Increased oil production from some major producers, along with the potential release of reserves from the United States, has contributed to a surplus in the market. And the resolution of some international conflicts, like the conflict between Israel and Hamas, has also reduced concerns about supply disruptions and contributed to price stabilization.
The second reason for seeing a drop in the price of fuel is that the Kenyan government subsidized fuel prices, absorbing some of the cost increases and mitigating the impact on consumers. It is noteworthy to emphasize that subsidizing fuel prices may provide some benefits such as reducing the cost of living, or protecting some industries that rely on them. But, these benefits are very short-termed and do not outweigh the negative consequences. Government subsidization creates long-term unintended consequences such as an increase in fiscal burden, or the inefficient allocation of resources. Moreover, the recent review of fuel taxes, along with holding off on proposed increases, has helped to keep prices down.
The third reason for fuel prices to decline is that the recent appreciation of the Kenyan shilling against the U.S. dollar has also contributed to the lower landed cost of imported fuel, making it cheaper for Kenyan consumers.
The news of the fuel price drop was followed by President Ruto’s declaration of debt relief a few days back during the country’s 60th independence anniversary.
Overall, the drop in fuel prices in Kenya is a positive development for the country, providing relief to consumers and businesses. However, it is important to note that fuel prices can fluctuate quickly and depend on various factors, so it is difficult to predict whether this downward trend will continue in the long term.