Cooking Gas Prices Are Expected To Rise Due To High Global Costs

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By Tonny Ingutia

Cooking gas prices may rise by as much as Sh403 for a 13-kilogramme cylinder as companies begin to adjust their rates, citing higher global commodity costs and a weaker shilling against the dollar.

For example, oil marketing company Lake Oil Group, which sells the Lake Gas brand of cooking gas, yesterday notified its customers that it will raise gas prices by Sh31 per kilogramme, effective immediately, citing an increase in global prices of liquefied petroleum gas (LPG).

The increase means that customers will pay an additional Sh186 to refill their 6kg cylinders and Sh403 for the 13kg cylinder.

The international rise in LPG rates, which is beyond our control, also forces us to raise our prices. Lake Oil was still forced to apply the same to all of its clients despite taking all factors into consideration.

The company informed customers that there will be an increase of Sh31 per kilogramme inclusive of Value Added Tax (VAT) effective immediately. Global propane prices have risen recently, wiping out the marginal gains consumers made from the government’s July 2017 halving of VAT on cooking gas.

The government through the Finance Act 2022 lowered the VAT charged on LPG from 16 per cent to eight per cent handing a much-needed reprieve to households braving a sharp increase in the cost of living.

The cut came a year after Parliament had reinstated the 16 per cent VAT on cooking gas which had seen the prices of the commodity rise sharply leading to public outcry. 

The tax cut slightly eased gas prices with data from the Kenya National Bureau of Statistics (KNBS) showing that prices fell from an average of Sh3,218 for a 13kg cylinder in June to Sh3,101 in July.

Liquefied petroleum gas prices

Local cooking gas prices, however, remained largely constant in the five months after July despite the sharp drop in international LPG prices amid a sharp decline in the value of the Kenyan shilling against the US dollar which raised the gas import costs. 

Propane prices hit a floor of $0.68 (Sh84) per gallon on December 7, 2022 — the lowest in almost two years since January 5, 2021 — but have risen sharply since then to $0.84 (Sh104) per gallon as of yesterday. These increased global prices coupled with a weak shilling have piled pressure on the import costs of cooking gas which oil companies are now passing on to consumers. 

Local cooking gas prices, however, remained largely constant in the five months after July despite the sharp drop in international LPG prices amid a sharp decline in the value of the Kenyan shilling against the US dollar which raised the gas import costs. 

Propane prices hit a floor of $0.68 (Sh84) per gallon on December 7, 2022 — the lowest in almost two years since January 5, 2021 — but have risen sharply since then to $0.84 (Sh104) per gallon as of yesterday. These increased global prices coupled with a weak shilling have piled pressure on the import costs of cooking gas which oil companies are now passing on to consumers. 

Local cooking gas prices, however, remained largely constant in the five months after July despite the sharp drop in international LPG prices amid a sharp decline in the value of the Kenyan shilling against the US dollar which raised the gas import costs. 

Propane prices hit a floor of $0.68 (Sh84) per gallon on December 7, 2022 — the lowest in almost two years since January 5, 2021 — but have risen sharply since then to $0.84 (Sh104) per gallon as of yesterday. These increased global prices coupled with a weak shilling have piled pressure on the import costs of cooking gas which oil companies are now passing on to consumers. 

Also Read: OdiPay – The Simplest and Most Convenient Way to Recharge Your Mobile in Kenya

Inflation

The high cost of cooking gas comes at a time Kenyans are braving inflation, which stood at nine per cent last month. 

While inflation has eased in the past three months, commodity prices remain high, especially the cost of food, fuel, and electricity. Consumption of LPG is growing owing to population growth, costlier alternative fuels due to a ban on logging that raised the cost of firewood and charcoal, and high kerosene prices as well as lower gas prices compared to a decade ago.

Data from the Energy and Petroleum Regulatory Authority (Epra) show that consumption will reach 373,865 tonnes in 2021, up from 320,909 metric tonnes in 2020.

To bring market stability, the government is considering regulating cooking gas prices.

Conclusion

In Kenya, Kenya Petroleum Refineries Ltd (KPRL) will build a common user facility with a capacity of up to 50,000 tonnes under the management of Kenya Pipeline Company (KPC

Through the open tender system, the government will import LPG through the facility. Cooking gas is supplied to other market participants at the same price by the winning private bidder, just as fuel is supplied to other market players.

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