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Fuel price drop should reflect global trend By The Standard Updated
1/15/2015
GMT +3 Share this story: NAIROBI: Crude oil prices have plunged in recent times by about 55 per cent on the back of low demand due to weak economic activity and a growing shift from oil to other efficient energy sources. Crucially, the significant drop since last June has been driven by the instability in two chief oil-producing countries, Libya and Iraq. From $115 a barrel in June 2014, the essential commodity now retails at below $45 a barrel. The biggest winners in such a development are the importers of crude oil, who now spend much less to buy and stock oil. Certainly, households, particularly the rural poor, would see more money in their pockets after filling up at the pumps while businesses will benefit from lower input costs. It is good news to everyone because this drop portends well for the economy. This was witnessed yesterday when the Energy Regulatory Commission ( ERC) cut the prices of fuel by about eight per cent across the board. The lukewarm move must be applauded even though Kenyans expected a "bolder step" that would be in tandem with the much steeper fall of crude oil prices in the global market. See also: Cofek unsatisfied with oil prices No doubt, fuel is a crucial ingredient in this country's economic growth because its prices impact on inflation, consumer spending and the auto market. The price drop, which we contend should have been bigger than what was offered, is a development that many farmers will rejoice about because this is the time most are preparing their land for the planting season. But this should not make ERC rest on its laurels. For Kenya to be competitive, ERC must take bolder steps to ensure than Kenyans draw commensurate benefits that other economies enjoy from drop in crude oil prices. However, Kenyans need to appreciate that the drop may not be as sustainable as may be widely desired. There are signs that crude oil prices may rise in the coming months as supply glut comes to a stop. But as things unfold, fuel consumers, especially manufacturers, should take advantage of the current prices and prepare for the future.
1/15/2015
GMT +3 Share this story: NAIROBI: Crude oil prices have plunged in recent times by about 55 per cent on the back of low demand due to weak economic activity and a growing shift from oil to other efficient energy sources. Crucially, the significant drop since last June has been driven by the instability in two chief oil-producing countries, Libya and Iraq. From $115 a barrel in June 2014, the essential commodity now retails at below $45 a barrel. The biggest winners in such a development are the importers of crude oil, who now spend much less to buy and stock oil. Certainly, households, particularly the rural poor, would see more money in their pockets after filling up at the pumps while businesses will benefit from lower input costs. It is good news to everyone because this drop portends well for the economy. This was witnessed yesterday when the Energy Regulatory Commission ( ERC) cut the prices of fuel by about eight per cent across the board. The lukewarm move must be applauded even though Kenyans expected a "bolder step" that would be in tandem with the much steeper fall of crude oil prices in the global market. See also: Cofek unsatisfied with oil prices No doubt, fuel is a crucial ingredient in this country's economic growth because its prices impact on inflation, consumer spending and the auto market. The price drop, which we contend should have been bigger than what was offered, is a development that many farmers will rejoice about because this is the time most are preparing their land for the planting season. But this should not make ERC rest on its laurels. For Kenya to be competitive, ERC must take bolder steps to ensure than Kenyans draw commensurate benefits that other economies enjoy from drop in crude oil prices. However, Kenyans need to appreciate that the drop may not be as sustainable as may be widely desired. There are signs that crude oil prices may rise in the coming months as supply glut comes to a stop. But as things unfold, fuel consumers, especially manufacturers, should take advantage of the current prices and prepare for the future.
