Jitters in East Africa as Global Oil Prices Rise to $85 a Barrel

OILMONSTER.COM- The global crude oil price has risen in the past week to a four-year high of $84.78 a barrel, sending jitters around the world about a further increase to above $100.

This price per barrel, recorded on Friday, is the highest since October 2014, driven by concerns over a possible reduction in global supply following the imposition of fresh US sanctions against Iran.

The sanctions, set to become effective on November 4, are expected to cut global supply by up to two million barrels a day.

President Donald Trump has asked the Organisation of Petroleum Exporting Countries to produce more oil to plug the anticipated deficit.

However, even a promise by Saudi Energy Minister Khalid Al-Falih that the kingdom is willing to tap all of its spare capacity of 1.3 million barrels a day, if necessary, does not seem to be reassuring the market.

In East Africa, a further increase in crude prices would worsen consumers’ plight as they pay more at the pump. Petrol is currently selling at $1.18 per litre in Kenya, Compared with $1.14 in Uganda, $1.01 in Tanzania and $1.28 in Rwanda.

Kenyan consumers will feel the pinch most, as a rise in oil prices would wipe out the relief President Uhuru Kenyatta pushed for last month after pump prices reached $1.28 in the wake of a 16 per cent tax on petroleum products. The president recommended a reduction of the VAT to eight per cent.

Regional consumers, who depend on Kenya for imports, will also experience a rise in the cost of doing business.

Kenyatta University economics lecturer Francis Omondi predicts that Brent crude oil prices will reach the $100 per barrel mark before the end of the year, which last happened in 2014, when the prices reaching $112.

“We are going into interesting times once the Iranian sanctions kick in,” he said.

Courtesy: www.theeastafrican.co.ke