Africa Commodities Energy Fuel Inflation Kenya Oil Rwanda

Kenya’s high oil prices could have effects in Rwanda

Rwanda’s economy could be braced for tough times as fuel prices not far away in Kenya rise to a 12-month high according to statistics from Central Bank of Kenya (CBK).

The East African economy said on Monday that its fuel inflation rose for the fourth straight month to hit 8.6 per cent in July, up from 4.5 per cent in March.

A careful analysis of this data shows that it is the first time since June last year for Kenya’s fuel inflation to be above food inflation.

Oil prices and levels of inflation are often seen as being connected in a cause-and-effect relationship. As oil prices move up, inflation—which is the measure of general price trends throughout the economy—follows in the same direction higher.

Earlier this year, oil prices collapsed amid the COVID-19 pandemic and economic slowdown. OPEC and its allies agreed to historic production cuts to stabilize prices, but they dropped to 20-year lows. So far oil prices are shooting higher and higher because of the effects of growing scarcity.

Also read: Rwanda signs €10M grant agreement with EU to support private sector

Kenya has the advantage of being a coastal country which makes importation of oil products much easier directly from OPEC suppliers.

However, in Kenya, Diesel and petrol prices last month jumped by Sh17.30 and Sh11.38 per litre, respectively—the fastest single-month jump in 13 years—blunting the pace of easing the cost of living.

For landlocked countries like Rwanda importing the already highly-priced oil in OPEC is again further affected by transport costs and the final consumer will definitely fork out extra cash per litre.

The costs of energy and transport will now be of concern to the economy given that it affects the pricing of goods and services in many other sectors such as transport, manufacturing and agriculture.

Original article on Taarifa Rwanda

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