World Bank Warns of Sharp Rise in Fuel Prices Due to Escalating Middle East Conflict
- Global fuel prices have been on the rise in the past five months to April 2024, accelerated by the supply-demand imbalances
- The World Bank warned that the ongoing Middle East conflict could further escalate the increase in prices
- Petroleum Outlets Association of Kenya (POAK) chair Martin Chomba noted that this could be felt in the May and June 2024 pump price reviews
TUKO.co.ke journalist Wycliffe Musalia brings over five years of experience in financial, business, and technology reporting, offering deep insights into Kenyan and global economic trends.
Kenya could post an increase in the price of petroleum products in the coming months should the ongoing conflict in the Middle East escalate.
Source: Getty Images
The World Bank warned that the Israeli-Hamas war is reversing the gains central banks have made in easing inflation.
What are the projected global prices?
In its Commodity Markets Outlook for April 2024, the global lender noted that heightened geopolitical tensions are keeping upward pressure on prices of critical commodities like fuel, stoking the risk of large price spikes.
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"Further conflict escalation involving one or more key oil producers could result in extraction and exports in the region being curtailed, rapidly lessening global oil supply. This could see average oil prices hit $102 (KSh 13,651) per barrel in 2024, more than 20% above the baseline forecast," read the report in part.
In April 2024, crude oil and Brent prices rose to $86.3 (KSh 11,237) and 90.5 (KSh 11,784), respectively.
Will the rise in global fuel prices affect Kenya?
Speaking exclusively to TUKO.co.ke, Petroleum Outlets Association of Kenya (POAK) chair Martin Chomba affirmed the World Bank projections, noting that this will be felt in the May and June pump price reviews going forward.
"There has been a recent surge in global fuel prices exacerbated by what is happening between Israelis and Hamas. We (Kenya) will start feeling the heat in the coming months... from the May and June pump price reviews."
The Energy and Petroleum Regulatory Authority (EPRA) announced a drop in fuel prices for April 2024, following trends in the strength of the shilling.
Why Kenya will experience a rise in pump prices
However, the value of the Kenya shilling registered a fresh decline in the third week of April 2024 to trade at KSh 132.5.
Chomba warned that with the current upsurge in global fuel prices, a weak shilling could reverse the gains Kenya has made in the petroleum sector.
He explained that the strong shilling has been a shield for the Kenyan market, but should it slide past the KSh 135 mark against the greenback, it will mean more fuel prices.
What to know about pump prices in Kenya
In April 2024, EPRA announced a decrease of KSh 5.31 per litre of petrol, KSh 10 per litre of diesel and KSh 18.68 per litre of kerosene.
Market analyst Rufas Kamau told TUKO.co.ke that if the shilling starts to lose ground against the US dollar and the oil price rally continues above $90 (KSh 11,925) per barrel, fuel hikes could occur.
Proofreading by Nyambura Guthua, journalist and copy editor at TUKO.co.ke
Source: TUKO.co.ke
