Petroleum prices set to rise further as Opec cuts output

Monday January 29 2018

A fuel pump at a petrol station. PHOTO | AFP

A fuel pump. Opec and Russia have agreed to maintain production cuts until the end of the year to reduce over-supply. PHOTO | AFP 

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Consumers of petroleum products in East Africa will dig deeper into their pockets this year as the era of low oil prices appears to have come to an end.

Kenya and Tanzania energy regulators recently reviewed the prices of petrol and diesel upwards on the back of increased cost of crude oil and refined fuels in the international market.

The price of diesel is also expected to surge upwards leading to higher cost of goods and services.

Nairobi based Hydrocarbons Management Consultants said the cost of crude oil is expected to trade at $60 to $70 a barrel in the global market this year.

“The move by crude oil producers to cut output is having a desired effect of pushing barrel price up,” said Hydrocarbons lead consultant Robert Shisoka.

The impact will be felt by Uganda, Rwanda, Burundi, South Sudan and Democratic Republic of Congo, which depend on Kenya and Tanzania as entry transit points for importation of refined oil products.

The cost of fuel inland increases depending on the distance from Mombasa and Dar es Salaam ports. Tanzania’s Tanga port on the coastline is another entry point for imports of oil products.

Reducing over-supply
The organisation of Petroleum Exporting Countries (Opec) and Russia have agreed to maintain production cuts until the end of the year to reduce over-supply, which is already propping prices to a near high of $70 per barrel of crude.

The Kenya Association of Manufacturers said an upswing in prices of oil products will lead to increased cost of manufacturing goods and provision of services with the knock-on effect being felt by the entire economy.

“Manufacturing industries use refined oil products in heating furnaces and transport or indirectly through electricity consumption where thermal plants use heavy fuel oil,” said KAM chief executive officer Phyllis Wakiaga.