1 December 2011

Kenya: The Unforgiving Effects of Rising Petrol Prices

Public Service Vehicles are set to go on strike from the 19th of December unless the government reduces the current fuel prices by 30%. The ... ( Resource: PSV Owners Demand Lowering of Fuel Prices )

Unless you absolutely have no access to information or have been able to function without the use of a vehicle, you are aware that the cost of fuel has skyrocketed over the past year and is now taking a significant bite out of many people's budgets.

Over the year, the Energy Regulatory Commission has been increasing the price of fuel every time it calls a meeting to announce the national monthly fuel price.

Although international fuel prices decreased marginally last month, the ERC in its monthly price announcement quoted an increase in local fuel prices, blaming the historic weakening of the shilling, which saw it touch the worst ever mark of Sh107 against the US dollar.

The commission projected a decrease in the price of fuel for the next month as international prices are stabilising, while the shilling is regaining value.

"We have noted that during November, international petroleum prices are stabilising while the Kenyan shilling is strengthening against the US dollar. This is likely to impact positively on pump prices in subsequent price reviews," said Mr Kaburu Mwirichia, the director general of ERC, when he announced the prices for the November-December period.

The price of super petrol, which is used by most personal cars, has risen by about 30 per cent while kerosene, used for cooking and lighting in many households, has increased by about 25 per cent over the year.

While the price adjustments may not seem to hurt you much when you fill up your car or buy a litre of kerosene, the seemingly insignificant price increase can add up to a lot of money over a long time.

If you are lucky to be making millions of shillings a month, the extra cost of increased fuel prices might go unnoticed as your fortunes cushion you.

However, if you are a common middle-class earner or worse and are already scraping to get by amid the hardships engulfing our economy, the unexpectedly high fuel cost is enough to drastically change your spending habits.

If it is not foregoing use of your personal car for a matatu or walk, the squeeze of escalating fuel prices has reduced your spending elsewhere, affecting your lifestyle and pushing an already feeble economy into more misery.

When Mr Danson Maina supported his wife to buy her own car in July last year, he did not perceive it the way he does now.

"We should have invested that money in a productive venture rather than buying a second family car, which has increased our spending significantly as the cost of fuel continues to puff up," he says.

To Mainas, life is not as it was a year ago. They could afford to visit their parents upcountry every month, but can now they can only do that once in a long time, sometimes even three months.

"The problem is the cost implication of the increase in fuel prices on companies has to be recovered through revising prices of their products, thereby passing on the pain to us. They are in business and they must make a profit, whatever it takes," he says.

National inflation hit the highest ever rate of 18.9 per cent in October on the backdrop of high fuel and food prices.

As companies strive to absorb the pressure exerted on them by high fuel prices which lead to increased cost of transportation of raw materials, finished products, and energy, they are forced to increase their prices to survive.

Unfortunately, the consumer has to shoulder this burden, in addition to the problems of fuelling their personal cars or rising bus fares and increased rates of servicing their loans at the bank.

"We have had to convert my wife's car into a taxi to diversify revenue sources to meet our other family needs," says Mr Maina.

Every morning, he leaves the family's house in Nairobi's South B area with his wife before traffic builds to avoid the extra cost of traffic snarl ups. He drops his wife at her office in Westlands before driving back to town, where he works.

This, he says, has helped to cut the monthly fuel budget by almost half.

"The money we save from sharing a car goes to meet other family needs which have increased as inflation has increased," he says.

But these constraints are not exclusive to Mr Maina's family. For most people who must travel to work, drop off their children at school, and perform other tasks that involve travelling, the household budget must adjust somehow to accommodate additional fuel costs.

In fact, many people now leave their cars at home, using matatus to work because it is cheaper.

With about Sh200, you can pay your daily bus fare to work and back home. This amount can only buy less than two litres of petrol for a personal vehicle, which is not enough to drive for the same distance, especially on the "traffic jammed" roads of Nairobi.

The high cost of living is jeopardising the livelihood of taxi operators. Explaining to a customer that they have to pay more due to the high cost of petrol is a challenge.

Mr David Njogu owns two taxis which operate from Belle Vue on Mombasa road. The father-of-two says the high fuel prices will drive cab operators out of business.

"With the current cost of fuel, we are not making any profits. All the revenue you collect goes to fuelling the car and if you mitigate this by raising charges, you stand to lose customers," he says.

"You know we have tough times throughout the country and the cost of living has gone up for everyone, so even customers do not have extra money to meet hiked rates," he adds.

At the end of the day, he says, everybody is suffering and the sooner the prices come down the better.

"We could be forced to try new business as the taxi business is slowly becoming hard to sustain," says Mr Maina.

By reasonably avoiding braking where possible and being soft on the accelerator peddle, you could help ease the consumption of your car, advises Mr Hassan, a mechanic.

"Servicing your car regularly helps keep it in good condition, averting chances of malfunction, which could result in over-consumption," he says.

While the public may never know whether what they are paying for fuel is the fairest price or if they are being exploited, the frequent upward review of fuel cost is a blow to the spending habits of Kenyans, who now have to dig deeper into their pockets and adjust their budgets to accommodate the soaring prices.

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