East Africa: Oil Prices Rise as Crisis Deepend in Libya, Middle East

By Henry Neondo

NAIROBI---On Monday, Kenya’s Energy Regulatory Commission (ERC) reviewed up pump prices by an average of Sh 4.

In Uganda, the fuel crisis has deepened with upcountry businesses grounding after a number of fuel stations remained closed due to shortage of supply by the importers.

Since last week, motorists in different parts of the country have been queuing for fuel at service stations. Some were seen strolling from one station to another before parking their cars at roadsides.

Kaburu Mwirichia, ERC Director- General in Kenya said the increase was due to political turmoil in the Arab world, which has negatively affected oil importing countries.

"During the month of February, the international prices of crude oil continued an upward trend that started July 2010," he said.

He added that the spreading unrest in the oil producing countries of North Africa and parts of the Middle East has continued to exert pressure on international oil prices.

He explained that the Free on Board prices for Murban Crude oil lifted in February was posted as $103.6 per barrel, an increase of 8.43 per cent from $95.55 per barrel in January.

In New York oil prices surged when Saudi Arabian troops moved into Bahrain  to help bolster the kingdom after a wave of popular uprisings.

Futures climbed as much as 0.7 percent as Saudi Arabia’s cabinet said the kingdom has responded to a Bahraini request for “support.”

Regional unrest has toppled the leaders of Tunisia and Egypt and reached Yemen, Oman and Iran.

“The Middle Eastern events are still the most important thing for the crude market,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “I don’t think market fears have dissipated. There continues to be violence in Libya.”

Crude oil for April delivery gained as much as 68 cents to $101.87 a barrel in electronic trading on the New York Mercantile Exchange, and was at $101.40 at 11:40 a.m. Sydney time.

According to Mwirichia, the average cost of imported super petrol increased by 1.8 per cent from $944.62 per metric tonne in January to $961.63 per metric tonne in February.

Over the same period average cost of imported diesel increased by 3.2 per cent from $841.79 per metric tonne to $868.37 per metric tonne.

The prices, calculated on the industry’s average supply of February, will see a litre of super petrol rise by as high as 4.6 per cent, while Kerosene goes up by Sh4.44 or 5.8 per cent.

A litre of super petrol would retail at Sh102.44 ($1.28) in Nairobi and as high as Sh113 ($1.41) in the border town of Mandera.

The prices, which run for the next 30 days, are a sharp increase from previous Sh98 in Nairobi, Sh99 Nakuru and Sh100 in Eldoret. 

Diesel will go up 2.9 per cent on average to retail at Sh94.53 in Nairobi, Sh91.39 in Mombasa, Sh96.73 in Kisumu and Sh96.67 in Eldoret.

In northern Ugandan town of Gulu, passengers were reported to be opting to walk instead of boarding taxis as transport fares doubled, whereas those in Hoima were stocking more fuel than they needed in anticipation of worse days ahead.

Mbarara Taxi Owners and Drivers Association vice chairman, Hajj Twaha Bakawonga, said transport fares on long routes had gone up.

Dickson Kwesiga, a boda boda cyclist on Mbaguta Street in Mbarara Municipality, said that fuel shortage had forced most cyclists to double fares.

The surge in prices, and the region’s shilling’s fall to record lows this week, threaten to dent the East Africa region’s growth prospects.

Kenya for example had forecast its economy to grow by 6 per cent in 2011, up from a forecast 5.1 per cent in 2010 and lifted by a recovery in agriculture, construction and the services sectors.

Year-on-year inflation rose for a fourth consecutive month in February to 6.54 per cent, from 5.42 per cent in January and well above the Central Bank target of 5 per cent.

The country’s inflation rate has risen after falling to a low of 3.09 per cent last October after the Government modified the basket of goods used in its inflation calculations.

The raised oil prices comes against the background of the country having introduced price controls December last year after pump prices hit Sh101 in November last year.