Latest statistics from Abu Dhabi National Oil Company show a 1.2 percent drop in international crude oil prices. The Free On Board (FOB) price of Murban crude oil lifted in December 2012 was posted at USD 110.75 per barrel from USD 112.10 per barrel in November 2012.

Crude Oil

International crude oil prices have been on a down ward trend over the past three months, from a USD 115.40 per barrel high in September 2012 to the lasts low of USD 110.75 per barrel in December 2012. This observed drop in international oil prices has seen local fuel prices drop.

The Shilling

Over the month of December 2012, the shilling depreciated against the dollar. Statistics from Central Bank of Kenya (CBK) and our calculations show the mean exchange rate for the month of December 2012 depreciated marginally to stand at KES 85.99 per US dollar compared to an average of KES 85.67 in November 2012. This represents 0.37 percent depreciation.

The mean exchange rate has been depreciating over the past four months from a KES 84.06 per US Dollar in August 2012 to the latest KES 85.99 per US Dollar in recorded in December 2012.

So what Now?

In a twist of events, motorists could be spared unfair charges at the pump, from next week, after the energy regulator (ERC) said it would not load storage costs for illegal imports onto fuel prices. As posted in the Business Daily, ERC said penalties slapped by shipping lines on fuel imports outside the Open Tender System (OTS) would not be factored in during the monthly price review.

While it might be too early to speculate, the observed drop in international crude oil prices, lifting of load storage costs for illegal imports in fuel prices may result in a drop in fuel price. Weakening of the shilling could counter this drop and balance things out. Watch out for our predicted fuel prices to be posted on Monday, 14^th January 2013.

The latest fuel price review, released on 14 December 2012, saw the retail price of super petrol and diesel drop to KES 112.61 and KES 105.79 per litter respectively in Nairobi while the price of Kerosene increased to KES 86.44 from KES 84.87, a rise attributed to inefficiencies of local refinery