Kenya: Assessing the impact of EPRA's new fuel prices

In Kenya, the Treasury has disclosed that excise duty on fuel will be revised by April next year in a move that mirrors one of Kenya’s commitments under an International Monetary Fund financing deal. To understand more about the impact of this decision and the rising global fuel prices on Kenya's petroleum industry, CNBC Africa spoke to Martin Chomba, Chairman of Petroleum Outlets Association of Kenya. Chomba highlighted the recent developments in the petroleum sector, particularly in the East African region, emphasizing the significant effect of global events on local markets. The recent decision by OPEC to cut down oil production led to a spike in demand and subsequently an escalation in crude oil prices, impacting countries like Kenya, which heavily rely on fuel imports to power their economies. This has resulted in an increase in fuel prices in Kenya, putting pressure on the cost of living for ordinary citizens. Chomba also discussed how the combination of rising global fuel prices and a weakening shilling in the Kenyan market has intensified the financial challenges faced by petroleum companies, which heavily rely on credit lines to sustain their operations. With the increased costs of financing distribution, companies are now forced to dig deeper into their pockets, ultimately leading to higher prices for consumers. Despite the tough economic landscape, Chomba expressed optimism that moving away from the existing subsidy model, which had proven to be ineffective and detrimental to the industry, could lead to a more stable market in the long run. He highlighted the challenges faced by oil marketers, such as Rubis, who have had to bear significant losses due to the previous subsidy system's inefficiencies. By transitioning to a more market-driven approach, Chomba believes that the industry may see improvements aligned with the principles of a normal market economy, potentially benefiting consumers in the long term.