Low global fuel prices cut Kenya's oil import bill 40%

Massive decline in international crude oil prices has cut Kenya's monthly oil import bill by about 40 percent despite the shilling weakening against the U.S. dollars making imports expensive.

Kenya's fuel and lubricants import bill stands at an average of 200 million U.S. dollars a month, down from 350 million dollars in 2014.

The shilling is currently exchanging against the U.S. dollars at an average of 103, a three-year low, down from 96 some months back.

The weakening currency has made imports into the East African nation expensive as importers have to spend more money to buy the dollars.

But that is not the case with the country's oil import bill, which has massively declined as crude oil prices fall. The price of crude oil per barrel in the international market on Thursday was quoted at 46.4 dollars, the lowest since 2010.

It is a great relief for Kenya which has been spending a lot of its foreign exchange reserves to settle the oil import bills.

Petroleum products are Kenya's second largest import commodity, accounting for 25 percent of the country's total imports. Kenya oil consumption stands at 4.5 million tonnes annually.

In August, latest economic data from Kenya National Bureau of Statistics (KNBS) showed Friday that East African nation's fuel and oil lubricants stood at 206 million dollars, down from 230 million dollars in July.

Since the start of the year to August, Kenya's has imported fuel and oil lubricants worth 1.6 billion dollars. During a similar period in 2014, the country's oil import bill stood at 2.3 billion dollars.

This year, the lowest oil import bill was recorded in March at 151 million dollars and the highest has been recorded in July at 230 million dollars, according to the data contained in the KNBS economic report.

A faster rise in the oil import bill had worsened Kenya's trade deficit, with East African nation importing goods worth over 21 billion dollars in the first quarter of the year as exports amounted to 7 billion dollars.

A further drop in oil prices would see the value of imports drop significantly particularly in the fourth quarter.

Kenya's highest annual oil import bill was recorded in 2012 when the value hit 32 billion dollars, doubling from 15.5 billion dollars in 2011.

Analysts attributed the surge to the rise in number of motor vehicles and increased industrial activity in the East African nation, besides high international oil prices.

The East African nation's oil products include jet fuel, kerosene, light diesel oil, petrol, heavy diesel oil and cooking gas.

Consumption of the products, however, has been on the decrease, with citizen's consuming an average of 280,000 MT tonnes of petroleum products a month, from about over 310,000 MT per month.

In its monthly review of the price of fuel products on October 14, Energy Regulatory Commission decreased the price of petrol by 0.09 dollars to retail at 0.90 dollars a litre. The cost of diesel went up by 0.02 dollars to 0.80 dollars and kerosene by 0.03 dollars to 0.54 dollars.

"Lower crude oil prices means our import bill has gone down and the trade deficit narrows. Definitely the low import bill is a good thing for Kenya. We hope it stays down for sometimes though ultimately it will hurt us if we start producing our own oil," noted Ernest Manuyo, a business management lecturer.

According to government-owned National Oil Corporation of Kenya, the country will increase annual oil products imports to around 6 million tonnes a year in the next two years from 4.5 million or 32 million barrels.