Tough times as new petroleum taxes push fuel prices up

By Lewis Njoka
Wednesday, July 15th, 2020
Motorists and motorcycle riders jam Shell petrol station in Nyahururu town yesterday morning in a rush to fuel following acute shortage of fuel in the Laikipia county. This is the only station where petrol was available. Photo/PD/DAVID MACHARIA
In summary
    • Charles Nyakundi, an oil marketer, says recent increase in taxes and fuel levies are responsible for the price increase than changes in international oil prices.
    • He says: “Most people might not be able to afford fuel once prices in the international markets begin to rise,” said Nyakundi.

Kenyans will have to dig deeper into their pockets to buy fuel following a steep increase in petroleum prices announced yesterday.

In its monthly review, the Energy and Petroleum Regulatory Authority (EPRA) announced that the maximum pump prices for Super petrol, Diesel and Kerosene in Nairobi had risen by Sh11.38, Sh17.30 and Sh2.98 per litre, respectively.

Conseqquently, in Nairobi Super petrol, Diesel and Kerosene will now retail at Sh100.48, Sh91.87 and Sh65.45.

In Mombasa, Super petrol will retail at Sh98.11, diesel Sh89.50, while kerosene will go for Sh63.09.

In the lakeside city of Kisumu, petrol will now go for Sh101.17 a litre, diesel at Sh92.74 and kerosene for 66.39.

While EPRA attributed the rise to a 12 per cent and 32 per cent increase in the average landed cost of petrol and diesel respectively, industry players said the increase had been caused by new taxes.

“The changes in this month’s prices are as a result of the average landed cost of imported Super Petrol increasing by 12.64 per cent from $248.21 per cubic metre in May, 2020, to $279.58 per cubic metre in June, 2020, and Diesel increasing by 32.16 per cent from $228.62 per cubic metre to $302.15 per cubic metre,” said EPRA in a statement.

“In the period under review, there was no Kerosene discharged at the Port of Mombasa.

Accordingly, the prevailing Kerosene price has been maintained but adjusted for the under recovery of Value Added Tax by oil marketing companies that occurred in the previous pricing cycle,” it added.

A highly placed source in the oil industry said recent increase in taxes and fuel levies are more responsible for the price increase than changes in international oil prices.

A July 10, 2020 Special Gazette notice by Petroleum minister John Munyes introduced the Petroleum Development Levy, paid to the Petroleum Development Fund that is charged at Sh5.4 per litre, up from Sh0.4 per litre previously. This is equivalent to a 1,350 per cent rise.

“The levy shall also be used for matters relating to the development of the oil industry including to stabilise local petroleum prices in instances of spikes occasioned by high landed costs above a threshold determined by the Authority,” says the minister.

Other charges

Additionally, oil marketers now have to pay Value Added Tax (VAT) on taxes introduced by the Finance Bill 2020. Prior to that oil marketers did not pay VAT on taxes.

Other charges include excise duty charged at Sh10 per litre of diesel and a road maintenance levy charged at Sh18 per litre.

“Most people might not be able to afford fuel once prices in the international markets begin to rise,” said the industry source.  

Last evening, motorists thronged petrol stations to fill their tanks after the price change was announced, before the new prices kicked in at midnight.

Before yesterday’s adjustment, Super petrol in Nairobi retailed at Sh89.10 per litre, diesel at Sh74.57, while kerosene sold at Sh62.46 per litre.  During the June review petrol prices in Nairobi rose by over Sh5 a litre.

A rise in fuel price will have a significant effect on the cost of energy and transport, resulting in increased cost of living.

The price increase comes at a time when ordinary citizens and businesses are reeling from the economic effects of the Covid-19 pandemic which has seen scores of workers laid off and others put on half pay.

However, the severity of the increase on cost of living is likely to be lessened by the recent dip in inflation which decreased to 4.59 per cent down from 5.33 the previous month, according to the Kenya National Bureau of Statistics.

The rise in fuel prices, which began last month, puts to an end to months of decrease in prices brought about by a price drop in the international markets as a result of a slump in demand caused by the coronavirus pandemic. 

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