Why Kenyans Won’t Enjoy Prolonged Cheap Fuel Costs in Near Future

The global oil market is currently experiencing an oversupply due to robust production from Russia, surpassing earlier projections, and a decrease in oil demand from major consumers such as the United States and China.

As a result, the Energy Petroleum Regulatory Authority (EPRA) has adjusted Kenya’s fuel cost, effective until January 14, 2024, attributing the reduction to a decrease in the landed cost of the commodity.

According to EPRA, the reduced cost is a consequence of the landing price dropping by 16.11% from US$827.75 per cubic meter in October 2023 to US$694.44 per cubic meter in November 2023.

Currently, crude oil is trading at a low of $69 per barrel, and the price of Murban oil has declined to USD 75.18 (Ksh.11,641) per barrel on December 7 from USD 85.51 (Ksh.13,240) per barrel on November 30.

Nothing To Smile About

Kenya is a non-OPEC country and the reduced fuel price may not remain constant due to potential fluctuations influenced by geopolitical events, supply-demand dynamics, and economic indicators.

This is outlined in Moody’s Analytics which has adjusted its forecast for Brent crude oil to $83.6 in 2024, down from $86.7 a month ago.

These figures are higher than the current price of Brent crude oil, which stands at $74.5.

Additionally, OPEC has recently agreed to cut production, marking their third such production cut in the last year.

Moody’s in its Oil Markets Outlook said “these production cuts are expected to constrain non-OPEC supply at a time when lower prices reduce the pace of production growth from non-OPEC.”

The projections for oil prices assume that the global expansion will continue and that central banks will limit any policy rate increases in response to moderating inflation rates.

Despite ongoing conflicts such as the war in Gaza, it is projected that the global supply of oil may not be significantly affected.

Oil prices can fluctuate based on a variety of factors, including geopolitical events, supply-demand dynamics, and economic indicators.