The Petroleum Outlets Association of Kenya (POAK) on Wednesday, February 14, warned that Kenyans enjoying low fuel prices should ultimately expect the cost to go up in the coming months.
Speaking to Kenyans.co.ke, POAK Chief Executive Officer (CEO) John Njogu explained that the fuel prices set to be released by the Energy and Petroleum Regulatory Authority (EPRA) on Wednesday are subsidised and not a true reflection of the actual pump price.
He noted that efforts by the government to stabilise the Kenyan currency against the Dollar and the steady decline of global fuel prices would also contribute to a further drop in oil prices.
Nonetheless, Njogu warned that in the long run, Kenyans should brace themselves for higher fuel costs citing that international market prices may hike owing to the recovery of the global economy and oil production cuts by the Organisation of the Petroleum Exporting Countries (OPEC).
To put it into perspective, a robust global economic recovery is normally associated with higher oil prices due to increased demand and improved market sentiment.
On the other hand, OPEC, which is tasked with ensuring fair and stable prices for petroleum products globally, plays a significant role in oil prices. If OPEC agrees to cut oil production, this will subsequently result in a lower supply of the commodity hence higher prices.
OPEC, however, considers various factors before implementing any policy including the level of the cuts, global demand for oil, and the state of the global economy among others.
"We have been having a subsidy on diesel. We still have a subsidy going on. Even if we're expecting a drop, there is still a component of subsidy. Subsidy means Kenyans are paying cheaper but it costs the government more. If fuel prices go down, there would rather be a marginal decrease on the pump and the other benefit goes to eliminating the subsidy," he explained.
"You might see the international market prices start going up because of the global economic recovery and OPEC cuts. We are likely to see prices above Ksh12,962 (85 Dollars) per barrel from the current Ksh11,742 (77 Dollars)."
Njogu detailed that some of the decisions implemented by President William Ruto's administration including the Government-to-Government arrangement with United Arab Emirates (UAE) hurt the oil trade business.
"When we got off the G2G, though it was needed at that time, a return to normalcy was better. Our small-scale shippers have stopped doing business. If you have a more expensive product, then you don't have customers," he noted.
He added that the country should also brace itself for the impact of Uganda withdrawing from purchasing fuel from Kenya.
"The Uganda contract ends this month, so we are likely to see a superfluous on the Kenya Pipeline Company (KPC) network. So, when the fuel lands, will it go to Mombasa port or go to Dar es Salaam?" he questioned.
