The Energy Regulatory Commission (ERC) is today, expected to announce reviewed fuel prices for the period starting 15 December 2012 to 14 January 2013. Based on the recent drop in international oil prices and the depreciation of the Shilling over the month of November, what should we expect in the forthcoming fuel price review?

As posted by Abu Dhabi National Oil Company, the Free On Board (FOB) price of Murban crude oil lifted during the month of November 2012 dropped to USD 112.10 per barrel from USD 113.20 per barrel in October 2012.

Data from Central Bank of Kenya (CBK) also showed that the shilling depreciated in October as compared to August 2012. From our calculations, the mean exchange rate for the month of November is KES 85.54 to the Dollar from KES 85.19 to the dollar posted in October. This reflects a 0.41 percent depreciation.

Based on the above price movement, our calculations showed that the price of super petrol will drop to KES 113.01, diesel to KES 105.22 and kerosene to KES 84.68.

Our calculations are based on the relationship between the price of crude oil in the international market, the strength of the shilling against major currencies and the prices set by ERC over the past 12 months. It is important to note; we took the assumption that costs associated with refining, production, transportation and prevailing taxes remained constant.

Our projected pump prices are for Nairobi.  The energy regulator (ERC) will post the exact fuel prices later on in the day.

As it currently stands, super petrol retails for KES 113.68, in Nairobi, Diesel at KES 105.85 and Kerosene at KES 84.87.

*Our calculations are subject to an allowance of + or – KES 3.