Consumers should gain from drop in fuel prices

A man adjusts fuel prices downwards on a price board at a petrol station in Eldoret town on September 15, 2014. The Energy Regulatory Commission is on Wednesday expected to announce new fuel prices, with consumers expecting a high reduction as global prices continue on a free fall. PHOTO | JARED NYATAYA |

Photo credit: File

What you need to know:

  • Why aren’t Kenyans enjoying the slide in global prices of crude oil? Fingers have been pointed at the closure of the Mombasa-based refinery in September last year, which has necessitated importation of the more expensive refined oil products.

  • Lack of an effective competitive environment is another reason that has been advanced by experts  for this state of affairs.

  • However,  the slump in prices of crude oil has been so deep that there is no justification for consumers not to feel the impact.

FOR THE COMMON man, falling prices of fuel ought to be good news. This is because  prices for goods and services are supposed to go down as well. Ideally, lower prices of fuel should translate to a drop in the cost of living.

However, although the prices have been on the decline  for a while now, there has not been a proportional easing of the cost of living among consumers.

The transport sector that should immediately feel the impact of falling fuel prices apparently has not  budged an inch in terms of lowering their charges. In fact, travellers during the festive season have had to dig deeper into their pockets to cope with the sky-high fares.

Why aren’t Kenyans enjoying the slide in global prices of crude oil? Fingers have been pointed at the closure of the Mombasa-based refinery in September last year, which has necessitated importation of the more expensive refined oil products.

Lack of an effective competitive environment is another reason that has been advanced by experts  for this state of affairs. However,  the slump in prices of crude oil has been so deep that there is no justification for consumers not to feel the impact.

Whenever the cost of living shoots up, the high cost of crude oil is invariably cited as the culprit. Yet now that we are witnessing a downward trend in the costs of fuel, nothing is happening by way of easing the lives of Kenyans.

BENEFITS FROM FALLING PRICES

Analysts have said farmers and electricity consumers are likely to reap benefits from the falling prices.

This is certainly good news. However, the benefits ought to accrue to as many Kenyans as possible even if it means the government stepping in.

Traders are often reluctant to reduce the prices of goods even when all economic indicators show that they should do so. Yet when prices of fuel go up, even by the merest of margins, they hastily push up the prices. 

Traders should know that they stand to benefit more when prices of goods reduce in tandem with dropping fuel prices.

This is because consumers will have more disposable income and hence strong spending power,  translating to increased consumption. Thanks to high demand from empowered consumers, traders will increase their output which means more revenue for them.

Over the recent past, the shilling has been doing badly against the dollar.

However, as the prices of crude oil continue to fall, the  local currency is bound to regain lost ground as traders will need less dollars because of reduction in the cost of oil which forms a major component of total imports. Needless to say, a strong shilling is pivotal to a robust economy. 

 

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