The recent increase in global crude oil supply has eased worries in East Africa of a possibility of high oil prices due to the ongoing sectarian conflict in parts of the Middle East.

Early this month, Brent crude, which serves as a benchmark for global oil prices, traded at a one-month low, thanks to a rebound in oil supplies from Libya.

There had been concern over exports from parts of the Middle East after Iraq, one of the world’s leading oil exporters, plunged into a sectarian war pitting government forces and Islamic State in Iraq and Syria (ISIS) rebels.

The war has already affected production in some parts of the country. The objective of the rebels is to create a caliphate, or Islamic state, spanning Iraq and Syria.

Analysts had expressed fears of a possible increase in the cost of living when crude oil prices hit $115.71 per barrel in early June.

This is because a sharp increase in global oil prices normally triggers a jump in inflation in the region, since oil is a major input in the production of goods and services.

Conflict in Libya

However, following the resumption of supplies from Libya, which was also affected by conflict, Brent has declined by about 40 cents to stay at $110.24 a barrel, which analysts say is the lowest since early June. The prices have since dropped by more than 4.5 per cent.

In addition, there were signs of Brent crude edging down towards $108 a barrel, in the second week of this month, making the decline one of the longest in four years, thanks to the weak demand in the United States. The decline has helped cancel the effects of a rise in crude oil imports into China.

“Yes, there has been concern that oil prices may increase following the violence in the Middle East, particularly Iraq. However, the increased production by Libya has covered the gap well enough and that is partly the reason why we have not seen a sharp increase in oil global prices,” said Mwendia Nyagah, the chief executive of Oil and Energy Services Ltd.

An increase in prices would have dealt a blow to the economies of East Africa, which are already experiencing slow economic growth due to factors ranging from insecurity to poor weather.

Mr Nyagah, however, said going by the current situation in the global oil market, there should not be much worry about prices in the East African region.

“I foresee prices remaining at reasonable levels for the rest of the year unless something drastic happens,” he added.

The international community welcomed the recent announcement by Libya that it has resumed supplies after suppressing rebellion by militants in some parts of the country.

The Libyan government announced it had 7.5 million barrels of oil stored at the ports of Es Sider and Ras Lanuf ready to be exported.

Apart from increased supplies, Mr Nyagah added that the reduced imports by the United States have also helped ease pressure from the demand side.

“In the past four years, the United States has been steadily increasing local oil production, reducing its reliance on imports. This has helped maintain supplies and stabilise prices,” he said.

Stable oil prices will be good news for the East African Community member countries, all oil importers spending millions of dollars hard earned foreign exchange buying the product.

Latest data from Kenya’s Energy Regulatory Commission shows the average landed cost of imported diesel decreased by 1.88 per cent from $962.95 per tonne in May this year to $944.87 per tonne in June.

Over the same period, the average landed cost of imported super petrol increased by 0.77 per cent from $1,050.89 per tonne to $1,059.02 per tonne. The cost for imported kerosene, on the other hand, increased by 1.43 per cent from $995.85 per tonne to $1,010.11 per tonne.

According to the United States Energy Information Administration (EIA), in 2012, Kenya consumed 81,450 barrels per day, Uganda 17,230 barrels per day , Tanzania 47,640 barrels per day, Rwanda 5,270 barrels per day and Burundi 2,270 barrels per day.

EIA projects that world energy consumption will grow by 56 per cent between 2010 and 2040, a trend that is destined to make oil even more expensive especially if global production fails to match demand.

Patrick Obath, managing consultant Eduardo Associates, concurred with Mr Nyagah’s sentiments, saying crude oil prices will remain stable this year. Mr Obath said prices are expected to fluctuate between $110 and $115, or even lower, so long as there are no sudden disruptions.

He said the prices are expected to fluctuate between $110 and $115, or even lower, so long as there are no sudden disruptions.

However, Mr Obath said the biggest challenge to Kenya and other East African countries was not the international oil prices but the cost of shipping the commodity from the exporting states to the region.

He said the size of the region’s market and ports make it impossible to import huge amounts of oil using super tankers.