Kenyans brace for rise in cooking gas price on high global costs

Consumer prices of cooking gas in Kenya may climb by as much as KSh403 ($3.23) for a 13-kilogramme cylinder as companies started adjusting their rates, citing higher global costs of the commodity and a weakened Kenyan shilling against the dollar.

For example, oil marketing company Lake Oil Group, which sells the Lake Gas brand of cooking gas, Thursday notified its customers that it will raise gas prices by KSh31 ($0.25) per kilogramme, effective immediately, citing an increase in global prices of liquefied petroleum gas (LPG).

The increase means that customers will pay an additional KSh186 ($1.49) to refill their 6kg cylinders and KSh403 for the 13kg cylinder.

“Due to the international increase in LPG rates that are beyond our control, we are also forced to increase our prices. We have taken into consideration all aspects but have been forced to apply the same to our clients,” said Lake Oil in a notice.

“Kindly take note that there shall be an increase of KSh31 per kilogramme inclusive of value added tax (VAT) effective immediately,” said the company.

Global propane prices

A recent rally in global propane prices has wiped out the marginal gains that consumers had made from the halving of VAT on cooking gas by the government in July last year.

The Kenyan government, through the Finance Act, 2022, lowered the VAT charged on LPG from 16 per cent to eight per cent, handing a much-needed reprieve to households braving a sharp increase in the cost of living.

The cut came a year after Parliament had reinstated the 16 per cent VAT on cooking gas which had seen the prices of the commodity rise sharply leading to a public outcry.

The tax cut slightly eased gas prices with data from the Kenya National Bureau of Statistics (KNBS) showing that prices fell from an average of KSh3,218 ($25.81) for a 13kg cylinder in June to KSh3,101 ($24.87) in July.

Prices remained constant

Local cooking gas prices, however, remained largely constant in the five months after July despite the sharp drop in international LPG prices amid a sharp decline in the value of the Kenyan shilling against the US dollar which raised the gas import costs.

Propane prices hit a floor of $0.68 (Sh84) per gallon on December 7, 2022 — the lowest in almost two years since January 5, 2021 — but have risen sharply since then to $0.84 (Sh104) per gallon as of Thursday. These increased global prices, coupled with a weak shilling, have piled pressure on the import costs of cooking gas which oil companies are now passing on to the Kenyan consumers.

The high cost of cooking gas comes at a time when Kenyans are braving inflation, which stood at nine per cent last month.

While inflation has eased in the past three months, commodity prices remain high, especially the cost of food, fuel, and electricity.

Consumption of LPG is growing owing to population growth, costlier alternative fuels due to a ban on logging that raised the cost of firewood and charcoal, and high kerosene prices as well as lower gas prices compared to a decade ago.

Data from the Energy and Petroleum Regulatory Authority (Epra) shows consumption hit 373,865 tonnes in 2021, a 13.9 per cent increase from the 320,909 metric tonnes recorded in 2020.

Price regulation

The government is mulling regulating cooking gas prices to instill stability in the market.

To achieve this, the Kenya Pipeline Company (KPC) is seeking to build a common user facility with a capacity of up to 50,000 tonnes that will be located at the Kenya Petroleum Refineries Ltd, which is run by KPC.

The facility is expected to enable the government to roll out the importation of LPG through the open tender system where a winning private bidder will supply the other market players with cooking gas at the same price, as is the case with fuel.