East African governments are staring at an expensive festive season due to a possible surge in fuel prices triggered by a cut in global crude supply and the rise in transit tolls in Suez Canal.
The international crude supply disruptions occasioned by the military conflict between Russia and Ukraine has been largely blamed on the skyrocketing fuel prices, in addition to domestic taxes which constitute more than 50 percent of the pump prices.
However, on October 5, the Organisation of Petroleum Exporting Countries (OPEC) and the non-OPEC Ministerial Meeting in Vienna, Austria agreed to cut overall oil production by two million barrels per day effective November, setting the stage for a higher crude prices
Under the deal, which will last up to December 2023, OPEC members will cut oil production by 1.27 million barrels per day while non-OPEC countries will cut production by 727,000 per barrel
Last week, Brent crude rose by 0.5 percent to $92.94 last month, the Suez Canal Authority announced that tolls for vessels using the waterway are set to rise by 15 percent from January next year, with the exception of dry bulk ships and cruise ships which will increase by 10 percent.
According to the Authority, continued increase in crude oil prices over $90 per barrel, and the increase in the average liquefied natural gas prices above $30 per million thermal units, have both led to a rise in the average prices of ships bunker and consequently an increase in the savings ships achieve by transiting through the Suez Canal compared with other alternative routes.
According to the Authority the increase is inevitable and a necessity in light of the current global inflation rates that reached more than eight percent translating into increased operational costs and the costs of the navigational services provided in the Canal.
The Suez Canal offers a significantly shorter route between Asia and Europe with the alternative involving sailing round the Cape of Good Hope.
Elevated oil prices alongside limits on Russian oil exports have increased the cost of importing refined petroleum and thereby putting pressure on Africa’s forex markets, with the biggest net importers such as Kenya suffering the most. In Kenya, the economy is grappling with fragile recovery largely due to high cost of living triggered by increased food and fuel prices, biting drought, high level of debts and the weakening shilling.
