Consumers want the Energy Regulatory Commission (ERC) drop fuel prices to Sh 85 a litre from current Sh 102 for petrol on the back of big slump in global oil prices that has seen petrol trade at Sh 55 in the US.
Consumer federation network has marshaled its members to attend today’s announcement for January review by the regulator to compel drop to their favoured margins.
Global crude oil prices have drastically dropped down to Sh 4,365($48.5) per barrel, its lowest in six years compared to levels last seen in April 2009.
However there has been little fun fair in the local market with consumers claiming sustained feather drop in pump prices effected by the regulator do not match global trends-sparking a huge debate.
While consumers are expecting significant drops in prices of the commodity, analysts interviewed by Smartinvestor though sharing the positive sentiments, they differed on margins of the next cuts by ERC.
“We are all guessing what will happen. Prices should go down in the next review but not as much as global margins due to high cost of importing refined petroleum,” said Sterling Investment Bank, director, John Karimi.
According to the analyst, refined oil lands into the country with a number of extra costs like fuel surcharge and Value added taxes (VAT), these he said cannot move local fuel prices to similar margins with international charges.
“Weakening shilling and volatility on forex exchange is also hurting review of oil prices. The two will net somewhere resulting to the lower margins,” said Karimi.
Last month, the regulator effected the fourth month cut in petroleum prices in a row but motorists and households were still not happy with the review.
Super petrol price dropped by Sh 4.79 to Sh 102.01 per liter, diesel by Sh3.79 to Sh 90.85 per liter while kerosene used by many to cook and light homes dropped to Sh 71.37 a sh 4.94 drop.
In the review ERC director of petroleum, Linus Gitonga cited high cost of importing refined petroleum was to blame for marginal cuts in local oil prices, following closure of Kenya petroleum refinery plant in September last year.
Rich Management Chief executive, AlyKhan Satchu said the economy can sustain substantial cut in oil prices buoyed by falling international prices and easing of pressure on the shilling against the dollar.
“I think it is entirely in the National Interest to cut the price. The Economy is soft it needs all the encouragement it can get,” said Satchu.
Over the last six months, crude oil prices have fallen by more than 50 percent, while local fuel prices only dropped by between seven and nine percent.
“There is a prima facie case for a price cut in excess of 10 percent. The Shilling has eased about six percent, we are way behind the curve,” said Satchu.