Businesses & Financial News

Living cost crisis as pump prices surge to record high in latest EPRA review

Pump prices for petrol, diesel and Kerosene to increase by Sh9 starting mid-night, Energy and Petroleum Regulatory Authority has announced (EPRA).

EPRA on Tuesday increased pump prices by Sh9 per litre pushing the cost of super and diesel to Sh159.12 and Sh140, respectively in Nairobi — the highest in Kenya’s history. Kerosene prices also went up by a similar margin and will now retail at Sh127 in Nairobi

The prices have set the stage for further increases in the cost of living at a time inflation has hit a 27-month high.

Kenya’s economy is diesel driven and this means that manufacturers, farmers and service providers will pass the increased fuel cost to consumers, which will further hit households and businesses.

The latest rise will see petrol prices increase by Sh24 per litre in just three months, the highest increase in the cost of diesel and super in three months since Kenya started setting pump prices.

The record prices will unleash inflationary pressure on the cost of living as manufacturers of goods, transporters and service providers pass the increased cost of fuel to the consumers.

Consumer inflation quickened for the fourth consecutive month hitting a high of 6.5 percent in April, up from 5.6 percent in March with the Kenya National Bureau of Statistics (KNBS) noting that such a rise was the highest seen for more than eight years.

Inflation – which is the rate at which the value of a currency is falling and, consequently, the general level of prices for goods and services is rising, has continued to build up on account of rising oil prices triggered by the ongoing Russia-Ukraine war and its direct impact of a weaker currency via imported inflation.

The country’s services sector shrank at the second-sharpest rate in May, a private sector survey has shown, in the latest sign of a mounting economic toll triggered by rising inflation and weakening shilling value.

For the second consecutive month, businesses reported a drop in activity during the month, with the latest S&P Global Kenya Purchasing Managers’ Index (PMI) registering a fall of 48.2 from 49.5 a month earlier.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dropped below the 50.0 no-change mark in April, falling to 49.5 from 50.5 in March.

The 50.0 mark separates growth in activity from contractions and readings below 50 show a deterioration.

“Economic activity in Kenya contracted for the second consecutive month in May due to inflationary pressures that resulted in a drop in customer demand and a reduction in firms’ output. Input price inflation remained at an 8-year high driven by rising fuel prices, higher taxes, and input shortages,” noted Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank.

According to panelists, the reduction in activity was devastatingly due to inflationary pressures, which impacted both operating costs and customer demand with firms also forced to scale back on output and employment levels.


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