How EPRA’s fuel margin hike could add pressure to Kenya’s cost of living

Kenya's recent fuel-price review has provided some relief for motorists, but a separate increase in the regulated margins earned by oil marketing companies (OMCs) could potentially put pressure on transportation and business expenses over time. The Energy and Petroleum Regulatory Authority (EPRA) raised the OMC margin by Ksh2.16 per litre for super petrol, diesel, and kerosene during the August-September pricing cycle.

This adjustment increased the margin on super petrol to Ksh19.55 per litre, diesel to Ksh19.47 per litre, and kerosene to Ksh19.40 per litre. However, the higher margin doesn't immediately translate to higher pump prices. EPRA's latest review saw a Ksh5 per litre decrease in diesel's maximum retail price in Nairobi, while super petrol and kerosene prices remained unchanged due to government stabilisation support amounting to Ksh938 million.

The higher regulated margin, while not an automatic price increase, could become significant in future pricing cycles if international oil prices, import costs, or other charges rise. Fuel is a crucial input for various sectors, including commercial transport, agriculture, manufacturing, and goods distribution. Sustained increases in petroleum-related costs can raise the cost of moving goods from production sites to markets, potentially leading to higher prices for consumers.

Although the latest margin adjustment does not guarantee an increase in inflation, it is a potential source of future price pressure. The government's stabilisation support has provided some immediate relief to businesses and consumers reliant on diesel, but the underlying costs in the petroleum supply chain remain. The Ksh2.16 increase in the OMC margin should be viewed as a potential contributor to higher fuel costs and, in turn, a more substantial impact on transport, business expenses, and consumer prices in Kenya's cost-of-living outlook.