Money Markets
By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com
In Summary
- The International Monetary Fund (IMF) says that net oil importers, Kenya included, are substantially passing on the price fall in the domestic fuel supply chain, while net exporters have largely retained old prices.
- Kenya is ranked in the top five countries with the largest pass-through at nearly 100 per cent alongside Mauritius, Senegal, Zambia and Malawi.
Kenyan motorists have benefited well from lower
global crude oil prices compared to other sub-Sahara African (SSA)
countries, an International Monetary Fund (IMF) report shows.
The IMF said in its SSA regional outlook for April 2015 that
net oil importers, Kenya included, are substantially passing on the
price fall in the domestic fuel supply chain, while net exporters have
largely retained old prices.
Kenya is ranked in the top five countries with the
largest pass-through at nearly 100 per cent alongside Mauritius,
Senegal, Zambia and Malawi.
The IMF report measures the pass-through of prices
along the supply chain to the final consumer by dividing the change of
local prices against international prices, both in domestic currency.
Compared to Kenya, consumers in Tanzania and Uganda
have enjoyed less reduction along the fuel supply chain at about 60 per
cent and 20 per cent respectively according to the IMF data.
“The pass-through has been partial and almost
entirely limited to oil importers…despite the fact that in sub-Saharan
Africa, only about 35 per cent of countries allow automatic adjustment
of retail prices, whereas the others set prices administratively,” said
IMF in the report.
“Overall, the median pass-through was only 31 per cent between June 2014 and early 2015.”
The IMF report appears to back the Energy
Regulatory Commission (ERC) which has maintained that consumers have
received the full possible benefit of lower crude prices at the fuel
pump.
The regulator has argued global oil prices account
for 60 per cent of the local retail prices, with shipment costs, profit
margins, taxes and other fixed charges accounting for the remaining 40
per cent.
The Consumer Federation of Kenya (Cofek) and Kenya
Association of Manufacturers (KAM) had in March faulted the pricing
formula, saying it favours the marketers more than consumers.
“The formula is anti-consumer since taxes and
levies, supplier margins and distribution costs are a fixed cost and not
a percentage. This essentially means these factors of fuel pricing do
not change with reduction in international prices,” Cofek had said.
The current maximum allowed price for petrol in
Nairobi is Sh89.35 per litre, diesel at Sh77.48 and kerosene at Sh57.21.
These prices reflect declines of 23, 26 and 32 per cent respectively
since the cost of crude oil started falling in June 2014. From Sh10,411
($110), a barrel costs Sh6,152 ($65) today.
Data from the Tanzania energy regulator shows that
at prevailing exchange rates, a litre of petrol in Dodoma is going at a
maximum of Sh89, diesel at Sh86.50 and kerosene at Sh85.65, all
representing a uniform 20 per cent reduction on June 2014 prices.
In Kampala, Uganda, a litre of petrol has fallen by
nine per cent to Sh108.70, while diesel is lower by 17 per cent to
retail at Sh88.30
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