Low-income Kenyans have been hit the hardest by the spike in fuel prices over the past year during, which pump price of kerosene has risen by 39 per cent, which is the fastest rate of any fuel product.
In comparison, the price of petrol, which is considered a preserve of well-off car owners, has risen by the slowest pace of 22 per cent, while the cost of diesel has jumped by 25 per cent in the same period.
In its latest monthly review of fuel prices effective last week, the Energy and Petroleum Regulatory Authority (Epra) maintained the price of petrol but lowered that of diesel and kerosene by Sh2 per litre in what was a slight relief for consumers.
Following the latest review, kerosene is now retailing at Sh203.06 per litre at the pump, an increase of Sh57.12 per litre compared to a pump price of Sh145.94 in November last year.
In comparison, the cost of petrol has risen by the lowest margin of Sh40.06 per litre to retail at a historic Sh217.36 up from Sh177.3 last year, while diesel has gone up by Sh41.47 per litre to retail at Sh203.47 up from Sh162.
Kerosene is mostly used by low-income earners to power their stoves for cooking and lighting. It is also used as a fuel by the aviation industry.
Economy of kerosene
Because of the unique economy of kerosene, however, the product is rarely sold at pump price.
Unlike petrol and diesel, which are sold to motorists at petrol stations, most Kenyans buy kerosene from their local shops, often in small quantities that last for a short period, typically a week or less.
Businessmen often procure the commodity in bulk and then resell it at a margin to retailers who also sell it to the final consumer at a margin, often leading to a huge difference in the pump price of kerosene and the actual price at kiosks.
Yet despite its standing as a critical energy source for hundreds of thousands of low-income households, the product was the least cushioned by the government through its stabilisation programme.
Epra was forced to dip into the Petroleum Development Levy Fund (PDLF) this month to stabilise fuel prices, without which prices could have skyrocketed to a new record high.
But the price of kerosene was stabilised by just Sh3.64 per litre compared to diesel which received the highest stabilisation of Sh19.82 per litre and petrol whose price was stabilised with Sh12.01 per litre.
This is even because it is by far the least consumed of the three fuel products, it is perhaps the least costly to stabilise prices to ease the burden on poor households.
For instance, only 5,370 tonnes of kerosene were sold in June 2023, according to data from the Kenya National Bureau of Statistics (KNBS). This is only a small fraction of the 187,860 tonnes of diesel and 121,340 tonnes of petrol that were dealt during the same month.
In contrast to petrol and diesel, the government has over the years, as a matter of policy, sought to make kerosene as expensive as possible and ideally align its price with that of diesel party to fight adulteration, which had become prevalent at a major cost to motorists, and second, to advance its clean energy goals by discouraging the use of dirty fuels.
In its latest attempt to make kerosene more expensive for instance, the government is seeking to review the anti-adulteration levy that is charged on the product could make it even more unaffordable for consumers.
Clean energy goals
Energy and Petroleum Cabinet Secretary Davis Chirchir last month said the State is considering adjusting the levy from a numerical figure to a floating charge to help fund its clean energy goals.
“We want to distribute 4.4 million gas cylinders to poor households within the next two years to promote clean cooking,” said CS Chirchir.
Kenya introduced the anti-adulteration levy through the Finance Act of 2018, following an amendment to the Miscellaneous Fees and Levies Act of 2016, at Sh18 for every litre of illuminating kerosene imported.
“One of the ways we are looking at to fund this is changing the anti-adulteration levy from a fixed charge to a floating charge. This will discourage the use of kerosene and enable more households to adopt the use of cooking gas,” said the CS.
The strategy to discourage consumption of kerosene appears to be bearing fruit as demand for the product has plummeted by nearly four times in the last four years alone, official statistics show.
According to data from KNBS, demand for paraffin has dropped sharply from 339,400 tonnes in 2018 to just 89,000 tonnes in 2022. This is in contrast to petrol and diesel, whose consumption has risen steadily during the period.
The drop in demand for kerosene is partially informed by the fact that while there are no ready substitutes for petrol and diesel, there are plenty of substitutes for kerosene such as cooking gas, electricity, charcoal, and firewood, which makes it easier for households to ditch its use as prices skyrocket.
For instance, removal of the 16 per cent Value Added Tax (VAT) on liquefied petroleum gas (LPG) through the Finance Act, of 2023 has brought the price of the commodity down.
Further, President William Ruto’s lift of a logging ban that had been in place since 2018 is expected to reduce the cost of charcoal and firewood, which could further accelerate reduction in consumption of kerosene.
The lifting of the ban has however since been temporarily halted by the High Court.
The faster jump in the prices of kerosene is just one of the illustrations of how poor households are affected more by inflation compared to their wealthier counterparts.
Due to their spending patterns, lower purchasing power, and the fact that low-income earners spend a larger share of their income on food, an increase in the cost of living affects them to a greater extent than middle-income and high-income households.
According to data from the Central Bank of Kenya (CBK) for instance, 12-month inflation for low-income households in Nairobi stood at 6.73 per cent in July, compared to just 5.38 per cent for high-income households.