Reduce pump price as global rates drop

Tuesday, March 10th, 2020 00:00 | By
Pump price. Photo/Courtesy

The coronavirus outbreak has visited misery, confusion, dread and death across the globe. 

The deadly flu, which has literally robbed the world of life and vibrancy, is now threatening to ground every activity—trading, manufacturing, travelling, sport and social interactions.

One of the hardest hit countries is China, an economic powerhouse, where the disease originated before fast spreading to other countries.

And as it struggles to contain the outbreak, the Asian country has had to shut down its factories, and this has not only drained the export stocks, but also reduced its oil consumption.

Consequently, this has caused an oil supply glut in the market, thus forcing a price dip. This is both bad and good for the global economy.

For countries like Kenya that depend on oil imports, a drop in the pump price is good news.

Despite the anxiety over coronavirus, Kenya can look at this paradoxical bright spot after the global oil prices hit their lowest levels in five years. 

For instance, Brent crude, the international fuel marker, has dropped from $45 (Sh4,629) a barrel to $31.02 (Sh3,191) a barrel, the biggest single-day plunge recorded since the Gulf War in early 1990s.

While Kenyan motorists should be smiling and waiting to reap from this drop, it will, however, not trickle down at the pumps in equal percentages because of the harsh taxation regime and export schedules.

A similar crash between 2014 and 2016 saw the huge slump in the price of oil was not mirrored by a similar fall in prices at the local pumps.

Already, the Energy and Petroleum Regulatory Authority has indicated the current drop in prices will not ooze similar percentage drop in cost of fuel locally.

Ironically, Rwanda and Uganda, which transport their fuel through Kenya have always enjoyed better pricing regimes. This beats logic.

Perhaps, it is now critical for the government to review some levies and policies in the sector for consumers to enjoy benefits of such occasional windfalls.

Given the centrality of petroleum in the economy, especially on the cost of doing business and living, there must be deliberate efforts to make it affordable. 

As local businesses take a hit from coronavirus impact, many enterprises will welcome any relief passed on downstream to will help lower inflation. A drop in pump prices could be a much deserved relief. It would be a godsend.

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