Two Clocks Set Your Pump Price: One Counts Barrels, the Other Counts Down to JanuaryTwo Clocks Set Your Pump Price: One Counts Barrels, the Other Counts Down to January

Kenya's pump price runs on two clocks. The import clock prices the fuel that arrived at the port in an earlier month. The tax clock counts down to the end of a temporary VAT cut in January. Read together, they explain how oil can plunge on a Thursday while the cap at the pump stays exactly where it was, and why the next two price reviews matter.

Nairobi's KSh 226.96 cap, litre by litre

The Energy and Petroleum Regulatory Authority (EPRA) publishes maximum pump prices once a month, for a cycle that runs from the 15th to the 14th. For 15 October to 14 November, the Nairobi caps are KSh 226.96 ($1.75) for super petrol, KSh 227.76 ($1.75) for diesel and KSh 219.87 ($1.69) for kerosene. Petrol rose KSh 12.93 ($0.10) from KSh 214.03 ($1.65) the month before.

Fill a 50-litre tank at the cap and you pay KSh 11,348 ($87.35), against KSh 10,702 ($82.38) under the old cap.

Where does the money go? Reports on EPRA's October review put the landed cost of super petrol, meaning the fuel delivered to Mombasa including freight and insurance, at US$977.55 per cubic metre, up 11.81% in a month. A cubic metre is 1,000 litres, so at the review's exchange rate of KSh 129.91 to the dollar, the fuel itself is about KSh 127 ($0.98) a litre.

On Mwenendo's arithmetic, that leaves about KSh 100 ($0.77) of the KSh 226.96 for everything after the port: taxes, levies, pipeline and depot costs, and the margins of wholesalers and retailers.

The shilling was not the culprit. It moved from 129.72 to 129.91 per dollar, a slide too small to matter. The rise came from the dollar price of fuel, and EPRA's director general, Edward Kinyua, said September was the worst month for import costs since the Middle East war began.

Brent's KSh 12,159 dip meets October's bill

Think of the cap as a duka running a monthly account. The shopkeeper totals what you took last month and bills you on the 14th, whatever the price of sugar did this morning.

The October review priced September's import costs. If the same rhythm holds, the 14 November review will weigh October, the month in which Brent closed at a six-month high near KSh 15,160 ($116.72), as Mwenendo reported. Brent's fall to KSh 12,159 ($94.11) on 5 November belongs to a later bill.

That is Mwenendo's reading of the pattern, not an EPRA statement. The authority publishes its pricing formulae, and the exact cargo window is worth confirming against them. But the logic is hard to escape: a monthly cap cannot react to a two-day swing in crude futures, in either direction.

One detail deserves a flag. The petrol cap rose KSh 12.93, slightly less than the roughly KSh 13.50 ($0.10) added to the import bill on the same figures, and the review material Mwenendo could read did not say what absorbed the gap.

The VAT clock behind KSh 16.81

The second clock is a tax. VAT on fuel is currently 8%, half the standard 16%, and it was extended for 90 days in mid-October, which carries it into January.

Here is the worked example. Strip 8% VAT from KSh 226.96 and the pre-tax price is KSh 210.15 ($1.62). The VAT itself is KSh 16.81 ($0.13). Put the standard 16% on the same pre-tax price and the litre costs KSh 243.77 ($1.88).

That KSh 16.81 difference is the size of the cliff, holding everything else fixed. On a 50-litre tank it is about KSh 841 ($6.47). For a motorist filling one tank a week, it is roughly KSh 3,360 ($25.86) a month.

The cliff matters beyond the pump. Transport prices were already up 17.1% on the year in October, and headline inflation reached 7.3%. A January return to 16% would land on top of whatever the import clock delivers in December.

Hormuz, the December review and what to watch

Iran says navigation aids in the southern Strait of Hormuz have been destroyed, a claim Mwenendo reported with the caveat that there is no independent confirmation that shipping has stopped.

If the disruption is real and lasting, it will not reach the pump on 14 November. It would show in the cargoes priced in November, which belong to the 14 December review, with the VAT decision following within weeks.

Three checks make the next cap easy to read. First, the average of Brent across the whole of November, not the headline on any one day. Second, whether the shilling stays near KSh 130 to the dollar. Third, whether the Treasury and Parliament extend the 8% VAT rate before it lapses.

The pump price is a delayed message from the oil market, delivered with a tax attached. Know the delay and the deadline, and you can budget for a price you have not yet been charged.