It has been less than a month since the government, through the Energy and Petroleum Regulatory Authority (EPRA), increased the fuel prices, pushing a liter of petrol past the Sh180 mark. The fuel burden on Kenyans is only expected to increase in the near future.
Under the proposed bill, the government wants to double the VAT to 16%. If the Finance bill, 2023, passes, as it likely will, it will increase the value added tax (VAT) on fuel.
What is more, Saudi Arabia, the world’s top oil exporter, recently announced that it will cut its oil production by another one million barrels per day from July, just months after the country and a few other members of the Organization of the Petroleum Exporting Countries (OPEC) cut production to 1.16 million barrels a day in April.The move is part of a deal by OPEC and their allies including Russia to limit supply into 2024. After the announcement on 4th June, the price of Brent crude oil rose by 2% to stand at Sh10,753.14 ($77.64) a barrel.
OPEC and its allies (OPEC+) had plans to cut their oil production by 2023, but have now extended their plans, having already cut 3.66 million barrels per day or 3.6% of global demand.
Through the move, OPEC+ members expect to increase oil prices or at least have it remain above the Sh11,080 ($80) mark per barrel in order to fund its ambitious development projects, such as the Sh69.25 trillion ($500 billion) futuristic desert city project dubbed Neom, aimed at diversifying the country’s economy.
OPEC+ accounts for around 40% of the world’s crude oil, and its decision will have a huge impact on oil prices. With the announcement impacting the price of crude oil within a day, we can imagine what it will do when the cuts take effect in a month.
According to Vincent Mutua, former Economics professor, the decision by OPEC+ to cut production will definitely benefit the members but it will have a worrying effect for the global economy. “Imagine a day in, the crude prices were already on the rise, in the coming months, we can expect a larger impact on oil prices which will lead to an increase in inflation,” he said.
The increase of fuel prices has already caused the cost of living to shoot up because diesel-reliant production costs translate directly to increased retail prices. If the Finance bill, 2023 is passed coupled with the increase in global crude oil, then many will find it difficult to survive.
Its clear that in a couple of months, many sectors will have no choice but to take in the effect of further increases in fuel prices and factor it in their pricing.
According to Simon Kimutai, Matatu Owners Association Chairman, the increase in fares was inevitable with the increased fuel prices and this eventually led to an increase in the price of products. “We know very well that for products to reach consumers they have to be transported, so the price of every product had to go up.
Email your news TIPS to Editor@nairobilawmonthly.com, and to advertise with us, call +254715061658 anytime of the day
