Kenyans stare at costlier fuel as oil rises 4% in week

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Kenyans stare at costlier fuel as oil rises 4% in week
Kenyans stare at costlier fuel as oil rises 4% in week

Africa-PressKenya. Kenyans are staring at high fuel prices as the Energy and Petroleum Regulatory Authority(EPRA) moves to review this month’s prices, expected to come out on Thursday.

This is on the rising global prices where oil rose on Friday, gaining about four per cent on the week, as a global energy crunch boosted U.S. prices to their highest in almost seven years.

Big power users have been struggling to meet demand.

Even with worldwide demand growing as economic activity rebounds from pandemic lows, the Organization of the Petroleum Exporting Countries and allied producers (OPEC+) last week said they would remain on the path of gradually bringing back production.

Meanwhile the U.S. government said it was monitoring energy markets, but it did not announce immediate action to lower prices, such as a release from strategic petroleum reserves, which further supported the oil market.

Brent crude futures rose 44 cents, or 0.5%, to settle at $82.39 (Sh9,119) a barrel.

Last week, the global benchmark hit a three-year high of $83.47 (Sh9,239).

RECENT REVIEW

Mid-last month, fuel prices in Kenya hit a historic high after prices of petrol, diesel and kerosene increased by Sh7.58, Sh7.94 and Sh12.97, respectively.

Coupled with at least nine taxes and levies, super petrol, diesel, and kerosene went up to Sh134.72, Sh115.60, and Sh110.82 per litre respectively, in Nairobi.

Taxation has been blamed for the high fuel prices in the country where consumers failed to benefit from a drop in global prices last year, when a barrel fell to below $20.

This is after the global economic activities slowed down as a result of the Covid-19 pandemic.

Taxes in fuel prices include excise duty which takes the lion’s share of Sh21.95 of every litre of petrol followed by the Road Maintenance Levy (Sh18).

VAT has been adjusted upwards to Sh9.98 while the Petroleum Development levy is charged at Sh5.40.

Other levies included in the fuel pricing are Petroleum Regulatory Levy, Railway Development Levy, Anti-adulteration Levy, Merchant Shipping Levy and the Import Declaration Fee.

Kenya has the most expensive pump prices in the region.

High fuel prices have affected the cost of living in the country, where inflation has been rising since April, hitting an 18-month high of 6.91 in August.

Manufacturers and transporters have warned of a jump in the cost of goods and services as they move to pass the high operational costs, occasioned by the fuel price jump, to the consumers.

Agricultural products are also expected to become costlier as diesel is a key input in production, mainly in large scale farming where machinery is used.

Last month, the Consumers Federation of Kenya (COFEK) called on President Uhuru Kenyatta to request parliament to review the Finance Act.

“We need to ease the cost of living especially by dropping added taxes on cooking gas, fuel and essentials foodstuffs,” Secretary-General Stephen Mutoro said.

The monthly fuel prices are inclusive of the eight per cent Value Added Tax in line with the Finance Act 2018, the Tax Act 2018, the Tax Laws(Amendment) Act 2020 and the revised rates for excise duty adjustment for inflation.

ATTEMPT TO REDUCE

Lawmakers in the country are considering tax cuts to ease fuel prices which are unlikely to come down soon.

The Finance committee chaired by Homa Bay Woman Representative Gladys Wanga seeks to reduce the petroleum levy charged on super diesel and petrol from Sh5.40 to 40 cents.

The levy would be charged on petrol, diesel and kerosene should MPs approve the proposal to revoke the Petroleum Development Levy Order, 2020 which increased the same by Sh5.

The committee further seeks to reduce the VA) charged on petroleum products from eight per cent to four per cent.

MPs want the National Treasury to prepare supplementary estimates to adjust the Sh22.6 billion revenue loss following the tax law change.

MPs further want VAT on cooking gas reduced from 16 per cent to eight per cent, anticipating a reduction of Sh4.7 billion revenue collected from the tax head.

The committee also seeks to reduce the gross margins for oil marketing companies to Sh3 from the current Sh12.

MPs at the same time want inflation adjustment on fuel for the year waived and the same be done biennially through the Finance Bill.

However, Kenyans may have to wait longer for the reliefs as the Wanga-led team is yet to issue a formal report to the August House recommending the adjustments.

The Homa Bay Woman Representative told a plenary sitting that the committee needs to probe new details on demurrage costs.

Demurrageis a charge payable to the owner of a chartered ship on failure to load or discharge the ship within the time agreed.

The committee was to conclude the review of the factors staging the high fuel prices by Wednesday.

This would mean that taxpayers may have another month – or longer, to wait for the prices to come down.

EPRA director general Daniel Kiptoo recently warned that the prices may increase further considering the global price of crude oil.

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