Tough times lie ahead for motorists and Kenyans following a consecutive two-week increase in global oil prices.
As detailed in the recent monetary and financial developments report, global oil prices have increased owing to growing international market demand.
On June 6, the Murban oil prices were projected at USD79.41 per barrel. However, those prices have shot up to USD84.78 per barrel as of June 20.
"International oil prices increased during the week ending June 13, reflecting increased oil demand and drawdown of oil inventories. Murban oil price rose to USD82.35 per barrel on June 13 compared to USD79.41 on June 6.
"International oil prices increased during the week ending June 20, reflecting a drawdown of inventories arising from improved demand. Murban oil price rose to USD84.78 per barrel on June 20 compared to USD82.35 on June 13," read the report in part.
Notably, these increases are being witnessed at a time when there are proposals to review the Road Maintenance Levy (RML) which is charged on every litre of fuel sold to Kenyans.
As proposed in the amendments of the Finance Bill 2024, the RML will be increased from the current Ksh18 to Ksh25.
Therefore, should the MPs adopt the proposals, the current prices of Super Petrol and Diesel will each increase by Ksh7.
On the other hand, given that oil marketers will be getting the fuel at a higher cost from the global market, the additional costs will be passed down to Kenyans. Therefore, the overall increase in costs could be more than Ksh7.
Why Increase the RML
As detailed in the report, the RML is proposed for an increment to finance various road maintenance projects. All the money collected from the RML is usually used to maintain roads across the country.
The Finance Committee highlighted that the various road departments were still depending on the exchequer, a move that was causing a strain on the budget.
"The fall in the collections under the Road Maintenance Levy has continued to affect the repair and maintenance of highways, urban, and rural roads. Recent el nino-linked heavy rains and flooding have further worsened the extent of road destruction in the country," the committee noted in its report.
Way Out of the Increase
Kenyans could be cushioned from the high prices should the government subsidise the pump prices.
Similarly, if the shilling continues to strengthen against the dollar, Kenyans will get a softer blow given that fuel is imported in dollars.
Currently, the dollar is trading at Ksh128.65.
Alternatively, MPs could reduce the proposed charges of RML or reject it altogether. The increase of the levy is set to be decided on Tuesday, June 25.
