Fuel price raised
14 November 2011, 17:49
Nairobi - Kenya's energy regulator raised the price of petrol, diesel and kerosene on Monday in response to high international crude oil prices and a weakening local currency, in a move that is likely to dampen hopes inflation in east Africa's biggest economy might have peaked.
Kenya's inflation rate hit 18.91 percent in October on rising food, electricity and fuel prices. The authorities' failure earlier in the year to control runaway prices depressed confidence in Kenya and hurt the Kenyan shilling, which hit a record low of 107 to the dollar last month and is still down by 13.5 percent to the dollar this year.
Kenya's central bank recently raised interest rates sharply to tame inflation and support the shilling.
The Energy Regulatory Commission said on Monday it would raise the price of super petrol in the capital Nairobi by 3.63 shillings to 124.13 shillings, while diesel prices would increase by 3.36 shillings to 114.30 shillings per litre. The price of kerosene would go up by 4.92 shillings to 94.87 shillings a litre. The changes would be nationwide and take effect on Tuesday.
"The key drivers of this trend have been high international prices of crude oil and refined products and a weakening shilling against the dollar," Kaburu Mwirichia, ERC director general, told a news conference.
Mwirichia said that rising interest rates locally had also added pressure on oil companies as they had to pay more on any borrowings they made to finance their oil purchases.
The base lending rates levied by commercial banks have been rising steadily in the past month, after the central bank's Monetary Policy Committee raised the benchmark lending rate to 16.50 percent from 11 percent last month.
"The cost of financing has increased substantially and petroleum marketers borrow to buy the fuel so we have factored 62 cents per litre as part of operating costs," Mwirichia said.
Kenya's economy is highly dependent on diesel for transport, power production and agriculture while kerosene is used in the homes of many of the country's population.
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