Kenya parliament discuss petroleum hikes

Yesterday, in Kenya's parliament, a report on the inquiry of the hike in petroleum prices and petroleum products was tabled. This development comes two weeks after record hikes in the East African community country. To delve into the reasons behind the unprecedented increase in petroleum prices, Churchill Ogutu from IC Asset Managers shed light on the contributing factors. According to Ogutu, the global oil prices and demand have played a significant role in driving up the landing cost of petroleum products in Kenya. The formula that dictates the price of these products includes factors such as global oil prices, currency depreciation or appreciation, as well as taxes and levies. In the month of September, the landing cost accounted for 46% of the final product price, with taxes and levies making up another 40%. These high costs led to public outcry and prompted private citizens to petition parliament for a review of the pricing formula. In response to the public outcry, the Department of Finance and Economic Planning and the Environment tabled recommendations to address the issue. One of the key recommendations is a reduction in the gross margin of oil marketing companies by 30% from 12 Kenyan Shillings per liter to 9 Kenyan Shillings per liter. This move is expected to have a positive impact on consumer prices and alleviate the burden on Kenyan citizens. Additionally, the committee proposed a reduction in value-added tax on pump prices from 8% to 4%, as well as a waiver on inflation adjustment for select products. These measures aim to lower the overall cost of petroleum products and provide relief to consumers. While these recommendations are welcomed by the public, there is anticipation of pushback from oil marketing companies who may resist the proposed reduction in their profit margins. Despite potential opposition, the recommendations hold promise for a more sustainable and balanced pricing structure for petroleum products in Kenya. Moving forward, consumers can expect to see a positive impact on pump prices in the upcoming reviews, starting from November. The concerted efforts of the parliament and government agencies to address the issue of petroleum price hikes demonstrate a commitment to easing the financial burden on Kenyan citizens and ensuring a fair and transparent pricing mechanism for petroleum products.