- Economic experts and analysts worldwide are expressing concerns over the decision made by Saudi Arabia and Russia to reduce their oil production, leading to fears of a potential deficit in the global energy market.
- As the world continues to monitor the global oil market closely, Kenyans anxiously await the outcome of these developments, unsure of how their own fuel prices will be affected.
Economic experts and analysts worldwide are expressing concerns over the decision made by Saudi Arabia and Russia to reduce their oil production, leading to fears of a potential deficit in the global energy market.
The news has sent shockwaves throughout the international energy landscape, prompting immediate speculation about the impact on oil prices.
In Kenya, these developments have caused alarm among citizens, who are already grappling with rising fuel costs. Just days ago, the Energy and Petroleum Regulatory Authority (EPRA) increased fuel prices in line with the implementation of a 16 per cent value-added tax (VAT) on petroleum products.
Now, there are growing concerns that the decision by Saudi Arabia and Russia could lead to further price hikes.
Experts are now attempting to determine whether the recent actions taken by these major oil-producing countries will indeed result in an increase in fuel prices in Kenya, where the current price of petrol stands at Sh195.53 per litre.
X.N. Iraki, a renowned economist and analyst, has cautioned that the impact of the oil production cuts on Kenya's fuel prices remains uncertain.
He emphasized the need to closely examine the global market dynamics, particularly whether non-Organization of the Petroleum Exporting Countries (OPEC) members will step in to cover the resulting deficit.
"If non-OPEC countries fail to address the supply shortfall, fuel prices would undoubtedly surge," Prof. Iraki warned.
However, Iraki revealed that Kenya may be spared from exorbitant price increases due to the country's existing import contracts with leading Middle Eastern oil giants, namely Aramco, National Oil Corporation Global Trading (ANOC), and Emirate's National Oil Company (NOC).
These contracts, established in March 2023, ensure that the government purchases petroleum products in Kenyan shillings through a credit system for a period of six months, thereby reducing dependence on fluctuations in the dollar exchange rate.
Another economist, Sam Okumu, shed light on the current situation in Kenya, noting that the high fuel prices have resulted in a decrease in demand. Importers, therefore, are unlikely to further raise prices in the near future.
"Our oil market operates based on global market forces, meaning that high demand and low supply would typically lead to increased prices. However, due to the current high prices, demand has been impacted, and people are actively seeking alternative means of energy," explained Okumu, highlighting why importers are hesitant to raise prices.
Addressing the nation on Thursday, June 1, President William Ruto revealed that his administration is committed to reducing Kenya's over-reliance on fossil fuels, demonstrating the government's dedication to finding sustainable energy alternatives.
As the world continues to monitor the global oil market closely, Kenyans anxiously await the outcome of these developments, unsure of how their own fuel prices will be affected.
For now, the country's import contracts and the decline in demand due to high prices offer some hope of insulation from potential price surges.