The strengthening of the shilling against the US dollar last month has triggered the biggest drop in fuel prices in four years that will see consumers pay less than Sh200 for a litre starting today despite the higher landed cost.
This follows the latest monthly review by the energy sector regulator that marked the fifth consecutive reduction in the final cost of the commodities.
The Energy and Petroleum Regulatory Authority (Epra) has reduced the price of petrol by Sh7.21 per litre, that of diesel by Sh5.09 and kerosene by Sh4.49.
This means that in Nairobi, petrol will be retailing at a maximum of Sh199.15 per litre while diesel and kerosene will be retailing at Sh190.38 and Sh188.74 respectively.
Epra used an exchange rate of Sh148.02 to the dollar on the February imports, reflecting a significant strengthening of the local currency compared to January when it traded at 164.42 units to the greenback.
The weakening of the dollar helped cut pump prices despite the landed cost per cubic metre of imported petrol, diesel and kerosene rising by 5.6, 0.76 and 1.65 percent to $703.49, $722.49 and $730.35 respectively last month compared to January.
"Further, the trade of petroleum products in the international markets is denominated in United States Dollars (USD), and an exchange rate is applied to convert the USD to KShs during the computation of local pump prices," Epra said.
The shilling has gained further this month, raising the prospect of even cheaper fuel prices in the next review. The new prices will be in effect until April 14.
In Mombasa, motorists will be paying a maximum of Sh195.97 for a litre of petrol, Sh187.21 for diesel and Sh185.58 for kerosene while in Eldoret it will be Sh198.98, Sh190.59 and Sh188.98 respectively.
This marks the fifth successive monthly reduction in the prices of fuel, handing a significant boost to consumers. Epra has reduced prices monthly since November last year.
This has seen the price per litre of petrol decline from a record high of Sh217.36 in the October-November 2023 period — when a combination of VAT doubling to 16 percent and the weak shilling inflicted the maximum pain.
At the same time, the diesel has dropped from Sh205.47 to Sh190.38 and kerosene from Sh203.06 to Sh188.74.
The decline, coupled with a drop in the cost of food, has helped to stabilise inflation in recent months.
Fuel plays a major role in the cost of living as it is used in a wide range of sectors, including transport, power generation and agriculture.
Inflation declined to 6.3 percent in February, according to the Kenya National Bureau of Statistics. It is the lowest year-on-year inflation since March 2022 when it stood at 5.56 percent.
The drop in fuel prices comes days after the energy regulator also reduced power prices by an average of Sh1 per unit, marking the second successive downward monthly review of electricity prices.
