The Kenyan economy is at an inflationary risk with the increase in global oil prices. Oil prices on Monday, February 8 rose to their highest in over a year.
According to Anderson Mwenda, a financial expert, said the prices of commodities especially those made with petroleum products will increase due to the increase in the production cost.
"A large portion of household budgets will be spent on this increase consequently leaving less to spend on other goods and services,” said Cooper.
In recent months, inflation has been on the rise with respect to the rising prices in food and fuel. In December 2020, food inflation hit a six-month high of 7.2 percent while fuel inflation hit 12.1 percent in January 2021 which was the highest since October 2020.
Supply cuts among key producers and hopes for further US economic stimulus measures to increase demand on oil products led to the increase in prices.
Since the economy of Kenya largely relies on diesel for transportation and power generation the increase in the prices is likely to highly impact the cost of living for Kenyan citizens. Due to the Covid-19 pandemic, most low-class earners reduced their reliance on cooking gas and opted for kerosine.
The increase in global oil prices, however, is good news for Tullow oil, as the oil explorer has been hit by the dropping prices of crude oil in 2020.
“The world has significantly changed in 2020 with continued low prices of less than Ksh 4,925 per barrel, and hence, there is a fundamental need to redesign the development so that we can deliver an economic project at ‘lower for longer’ oil price world,” said the Chief Executive Officer of Tullow Oil, Rahul Dhir.
Consumers of crude oil had been promised by the state to be given a subsidy that excludes petrol when the prices crossed the $50 per barrel mark. This subsidy would be raised through the Petroleum Development Levy.
The petroleum levy was increased from Ksh0.40 to Ksh 5.40 a litre in July 2020. An equivalent of the subsidy would be paid to the oil marketers.
