Energy and Petroleum Regulatory Authority (EPRA) Director General Edward Kinyua explained why changes in international oil prices don’t automatically translate into lower fuel prices in Kenya.
Speaking in an interview, Kinyua cited the time it takes to import petroleum products and the costs factored into the monthly pricing formula.
He added that international oil prices were among the factors considered by EPRA when calculating local pump prices, alongside other expenses associated with purchasing and transporting fuel to the country.
However, he noted that a drop in global oil prices does not immediately affect motorists because fuel must go through ordering, refining, shipping and delivery before reaching Kenya.
“The international oil prices have dropped, but remember that the barrel has to go into a refining process and then the logistics of ordering, loading, voyage and discharging,” Kinyua said.
“Between now and when the barrel arrives in Mombasa, it takes between 30 and 45 days. That is why it may not be immediately reflected at the pump because whatever we have now was ordered 30 days before,” he added.
His explanation comes as motorists continue to monitor international oil prices and question why changes in the global market do not always result in immediate relief at local filling stations.
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Edward Kinyua on how EPRA Calculates Fuel Prices
Kenya imports refined petroleum products, so the cost of buying petrol, diesel, and kerosene from international suppliers is a key factor in setting local prices.
EPRA uses a pricing formula under the Energy (Petroleum Pricing) Regulations, 2022, to set maximum wholesale and retail prices for the products.
Kinyua said international market movements were part of the calculations used to determine the fuel prices announced each month.
“The movement of fuel in the international market in terms of price is one of the factors that we consider when we use this formula,” he said.
The formula accounts for the landed cost of imported petroleum products, including the cost of purchasing the fuel and bringing it to Kenya.
Other components include freight, insurance, port handling, storage, financing costs, transportation, approved margins and applicable taxes.
The exchange rate also affects the final price because importers generally pay for petroleum in US dollars.
For example, when the shilling weakens against the dollar, importers need more shillings to purchase the same amount of fuel.
Why the Timing of Fuel Imports Matters
The timing of shipments is central to understanding how global price changes reach Kenyan motorists.
According to Kinyua, the process of ordering, loading, transporting and discharging petroleum products takes several weeks. Fuel arriving at the Port of Mombasa may therefore have been purchased when international prices were higher.
This means the cost of fuel currently entering the country may not reflect the latest decline in global prices.
The same applies when international prices rise. Higher prices may take time to feed through the import and distribution chain, depending on when shipments were purchased and the costs captured during the monthly review.
EPRA’s pricing framework considers the costs of qualifying petroleum cargoes discharged at the Port of Mombasa during the specified review period. It does not simply use the international oil price prevailing on the day the regulator announces new pump prices.
Consequently, motorists may have to wait for subsequent price reviews before the full effect of lower international prices becomes apparent at local filling stations.
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Why Fuel Prices Differ Across Towns
The cost of transporting fuel within Kenya also affects the prices motorists pay.
After imported petroleum products arrive at the port, they are handled, stored and distributed to depots and filling stations across the country. These processes attract costs that are factored into the pricing formula.
EPRA therefore publishes maximum wholesale and retail prices for different towns, with variations reflecting the permitted costs of supplying each location.
The published prices are ceilings. Licensed retailers may sell fuel below the applicable maximum price but cannot exceed it.
This means motorists in different parts of the country may pay different prices even during the same pricing period.
EPRA DG said a sustained decline in international petroleum prices can eventually reduce the cost of importing fuel into Kenya.
However, the extent of the reduction depends on when the products were purchased, the cost of transporting them, movements in the exchange rate and other components of EPRA’s pricing formula.
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