Have you ever wondered how the Energy and Petroleum Regulatory Authority (EPRA) determines the prices of fuel each month? The authority has shed light on the factors that determine how deeply consumers will dig into their pockets to afford the precious commodity.
In EPRA's Energy and Statistics Report during the first half of the financial year 2024/2025, the authority revealed that the calculation of fuel prices each month was dependent on several different cost components.
At the top of these components are landed costs, which entail expenses incurred when petroleum products arrive in the country through Kenyan ports. These costs include shipping and insurance.
Another factor EPRA uses is distribution costs, as the authority calculates expenses relating to the transportation of fuel from import terminals to different retail outlets all over the country.
Government levies also play a key role in determining the pump price, according to EPRA. If taxes and levies are fairly favourable, the authority is able to factor this in while determining how prices will be set, at least for the next 30 days.
Notably, in recent times, fuel prices have been heavily influenced by taxes, with nearly half the cost per litre of petrol and diesel hinging on taxes. Increases in the Road Maintenance Levy (RML) and the Railway Development Levy (RDL) have been tipped to be the main reason why taxes are such a huge contributor to the current prices of fuel in the country.
There are also demurrage costs, which EPRA explains are incurred when tankers experience delays at the port. These delays can lead to additional expenses, potentially spiking fuel prices.
Finally, another key determinant of pump prices is the margins accrued by Oil Marketing Companies (OMCs). The authority consolidates the margins and determines the final pricing of fuel products, including Premium Motor Spirit (PMS), Automotive Gas Oil (AGO), and Illuminating Kerosene (IK).
Notably, despite an array of factors affecting pump prices, the numbers associated with fuel have been relatively stable in recent months, with EPRA observing that the demand for petroleum products has also been steady through the period under review.
"There was a steady decline in fuel prices during the review period, which reflected the trend in international oil prices," EPRA said in the report.
In the same report, EPRA also highlighted the emerging issue of power outages, with statistics showing Kenyans are experiencing an average of nine hours of electricity outages per month.
This stark finding, quantified by the System Average Interruption Duration Index (SAIDI), indicates a considerable decline in the consistency of power provision across the nation. SAIDI, a key measure of electricity reliability, tallies the total duration of all power interruptions experienced by the average customer during a specified period.
