The First Receipt: The Pump Pays Before Anyone Else When Oil Jumps

When the oil price jumps, the first Kenyan to feel it is not a minister. It is the person standing at a pump with a jerrycan, and the matatu driver behind them.

Kenya imports almost all of its fuel. The barrel is priced in dollars, in a market Kenya does not set. The Energy and Petroleum Regulatory Authority then builds a local price: the landed cost, taxes, a road levy of KSh 25 a litre, and the margins for the importer, the distributor and the station.

A dearer barrel moves through that sum in weeks, not years. The temporary cut in value-added tax on fuel, which the Central Bank credited in its October pack, softens one line. It does not cancel the others.

Demand is already rising. EPRA's year to June showed domestic petroleum use up 8.41 per cent, and cooking gas at 475,943 tonnes. More litres at a higher price is a larger bill for the same journey. The Bank's October papers named Middle East supply as the risk it is watching, and held the policy rate at 8.75 per cent anyway. A rate hold does not cheapen diesel.

The queue at the pump is the start, not the end

The station is where the price becomes visible. It is not where it stops. A matatu buys diesel every day. The fare does not move the same afternoon, because the owner is competing with the vehicle in front, but it moves within the week if the new price sticks. A boda rider has no store of fuel and no room to absorb a KSh 10 jump. They pass it on, or they park.

Food is next. Maize and vegetables move by truck. A transporter who pays more for diesel does not donate the difference. The extra sits in the price of a bag of unga, then in the price of bread, then in a hotel bill. A household that does not own a car still pays, at the kibanda.

That is why a fuel shock looks like an inflation number a month later. The September inflation rate of 6.80 per cent already had energy in it. A fresh jump would show up in the next print, first in transport, then in food.

A factory is last in the queue and often loudest. Cement, steel and packaged food use diesel for generators when the power dips, and for delivery when it does not. They can sometimes delay a price rise. A kiosk cannot. The person with the least stock and the least credit pays first and in full.

A local refinery does not repeal the barrel

There is a hope, encouraged by the Lamu speeches, that a plant on the coast will insulate the pump. It will not, if the crude is imported. Lamu is designed for 700,000 barrels a day, and Kenyan fields cannot fill it. Imported crude is still priced in dollars. A refinery can cut the freight and a trader's margin.

It cannot set the world price, and it cannot remove the KSh 25 levy, which is a Kenyan decision, not an OPEC one.

The useful question, the next time the barrel moves, is not whether the government will do something. It is who has no stock. The jerrycan, the matatu and the unga queue pay before anyone writes a statement.