Oil prices inflate import bill

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Rise in price of oil in the international markets forced the country to spend 25 per cent more on petroleum imports even though the volume of products consumed decreased last year.

According to the Economic Survey released Tuesday, the total import bill for petroleum products rose to Sh200.8 billion last year, a 25.3 per cent rise compared to Sh160.2 billion spent in 2009.

The value of imports went up after high crude oil prices rose from $76 a barrel towards end of 2009 to $92 per barrel in December 2010. Crude oil prices have risen further in recent months, hitting a two-year high of $125 in April on the back of political crises in the Middle East, a factor that might affect consumption patterns.

The higher import bill came despite an 8.3 per cent decline in the volume of petroleum products imported into Kenya last year. The country imported 3.8 billion tonnes of petroleum products, down from 4.2 billion tonnes imported in 2009. Crude oil imported to the country also dropped 4.7 per cent to 1.55 billion tonnes from 1.63 billion tonnes in 2009.

The high cost of acquiring petroleum products, largely sourced from the Middle East, was reflected in retail prices that went up in the course of last year. This was despite a generally stable pricing of crude oil in the international markets.

“Retail pump prices for premium petrol, gas oil (diesel) and kerosene generally maintained an upward trend. On the contrary, international murban oil prices were generally low, except for April and the period of October to December when they were on a steady rise,” said the survey.

Lion’s share

The bulk of fuel imported was consumed by the transport sector, which accounted for 80 per cent of fuel sold in the country. Other sectors that made key consumers were aviation and agriculture.

However, there was a 19 per cent decline in consumption among thermal electricity generators, which was attributed to increased water levels at the Seven Folks dam, which lead to more power generation from the cheaper hydro sources.

In the electricity sub sector, the country’s installed capacity grew 7.7 per cent to 1,412 megawatts, up from 1,311 MW in 2009 following the commissioning of a number of new power generating stations.

Electricity generation from Geothermal and other alternative sources are expected to increase the installed capacity in the coming years. There is an estimated 7,000 MW of geothermal power, with the country only exploiting about 10 per cent of this. Wind is also expected to play a significant role in the future, with an ongoing project of putting up a wind farm in Lake Turkana that is expected to bring an additional 300 MW to the national grid.

In 2010,the total electricity generation increased 7.2 per cent compared to a marginal growth of 0.8 per cent in 2009. The current installed capacity is, however, still low, compared to the country’s peak demand that is already in excess of 1,200 MW, and growing steadily.

Consumption of electricity grew 6 per cent to 5.75 kilowatt hour (KWh) last year from 5.4 billion KWh in 2009.

The number of customers connected under the Rural Electrification Programme went up 22.3 per cent to 251,056 as at June 2010 from 205,287 in 2009.

 

Source: http://www.standardmedia.co.ke/business/InsidePage.php?id=2000035352&cid=14&story=Oil%20prices%20inflate%20import%20bill

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