Inflation, rising oil prices to hurt Kenyans more

Rising international oil prices, which hit $81 a barrel yesterday, are likely to impact on domestic prices further as the country battles to contain inflation that has strayed out of the target single digit level.

Even before the recent crude oil rally, fears of inflation pressure were already high after the meteorological department projected heavy short rains that would lead to floods and mudslides, heralding poor harvests.
Local pump prices went up again towards the end of last week by Sh2 to hit over Sh80 for the unleaded petrol although it was still possibly to find same product in some branded stations selling at Sh77 in Ruaraka area of Nairobi.

Last week, Mr Andrew Omolo, the commercial manager of Triton Petroleum, told the Business Daily that global oil prices outlook is still not very encouraging, local pump prices will remain in the same range or move up.

Mr Charles Ocholla, head of investment banking and fund management, said in an interview that the price hike would affect manufacturers and transporters, among other business, which would be reflected in higher inflation and this could even affect economic growth.

Chances are that the overall 12-month inflation that declined to 12.4 per cent in August, from 13.6 per cent in July, could go up in September on account of the higher oil prices.

The government target is single digit inflation, which has often proved elusive for the last two years.

Among the consumers of paraffin and public transport users in the Nairobi lower income group, inflation was highest averaging 14.3 per cent in August. Indeed, this was the third successive month recording double digit inflation in 2007.

Business Daily Africa