Kenya saves Ksh.121B from fall of oil prices last year

Kenya save Ksh.121 billion ($1.1 billion) in foreign exchange from the fall of international oil prices across 2020.

Kenya’s oil bill, which represents about one fifth of all imports, was down 33.1 per cent from 2019 as prices dipped from lower demand following the start of the COVID-19 pandemic.

This is according to preliminary data from the Central Bank of Kenya (CBK).

The year was further marked by a consistent deceleration in key imports into the country with the value of total imports sinking by 12.5 per cent.

On the contrary, exports rebounded to grow by 3.3 per cent in 2020 supported largely by receipts from tea and greater horticulture volumes.

The lower import bill, which largely emanated from low oil prices, matched higher export receipts to lower Kenya’s current account deficit to an estimated 4.8 per cent in December.

Kenya’s trade balance has continued to improve over recent years declining from highs of 11.2 and 10.7 per cent respectively in 2011 and 2013 respectively.

Real benefits?

Kenyans saw their lowest cost at the pump in the months of May and June last year when petrol costs fell to Ksh.83.33 in Nairobi.

Diesel and kerosene costs meanwhile hit a low Ksh.74.57 and Ksh.62.46 respectively.

This is as murban crude oil prices hit a low Ksh.1942.60 ($17.66) per barrel in April with the demand for fuel across the globe sinking under COVID-19 restriction measures such as lockdowns.

Kenyans nevertheless failed to draw greater benefits from low oil prices courtesy of exorbitant government taxes which exceed the landed cost of fuel.

Moreover, the diluted benefits have only been short-lived with crude prices marking a recovery in recent months leading to subsequent upward revisions in the maximum pump prices by the Energy and Petroleum Regulatory Authority (EPRA).

For instance, Murban currently sells at Ksh.6039 ($54.90) a barrel while local fuel costs have reversed to Ksh.106.99, Ksh.96.40 and Ksh.87.12 for petrol, diesel and kerosene respectively.

According to an analysis of dissected costs, 51.8 per cent of total petrol costs represent taxes and levies.

This include Ksh.21.95 in exercise duty, Ksh.18 in the road maintenance levy, Ksh.5.40 in the petroleum development levy, 25 cents in the petroleum regulatory levy and 68 cents in the railway development levy.

Other levies include three cents in the merchant shipping levy, Ksh.1.18 in the import declaration fee and Ksh.7.93 in value added tax (VAT).

In contrast landed costs only represent Ksh.36, storage and distribution represents Ksh.3.17 while margins to oil marketing companies (OMCs) represent the balance of Ksh.12.39.