Inside Politics

Logistic challenges serve Kenyans costly Christmas

Wednesday, November 3rd, 2021 00:00 |
Energy and Petroluem Regulatory increases the price of Petrol in Nairobi. PHOTO/PD FILE

A global shortage of oil and shipping containers are conniving to serve Kenyans an expensive Christmas season with consumer goods expected to rally ahead of the festive period.

Already, there is unease in China which is facing a massive power crunch, as coal and natural gas shortages have led to closure of factories. This could see cost of consumer prices going up.

British Broadcasting Corporation reported that the challenges in the supply chain are driven by coal and natural gas shortages in “China and India, which analysts predict will see users switch to oil for power generation and heating”.

With global petroleum inventories having already fallen to their lowest seasonal level for seven years, and as producers fail to increase output to match the rebound in consumption after the pandemic shocks, the fuel crunch is set to tighten.

“The oil shortage is largely discretionary, as producers in the OPEC+ group of major exporting countries and U.S. shale firms have opted to limit increases in their output,” Reuters reports.

This means Kenyans should just await higher landing cost of fuel due to heavy demand from major importers which normally translates to high prices anywhere.

When oil prices rise, the prices of food, transport and other services tag along creating an inflationary whirlwind.

With most Kenyans expected to travel home for Christmas festivities bus fares are set to rise higher than in the previous years as bus operators factor oil prices in their bus fares.

Last month local oil prices hit Sh136 per litre of petrol but the government stepped through the Petroleum Development Levy helping to subsidise petrol prices down to Sh129 a litre in Nairobi.

But following public outcry, the Energy and Petroleum Regulatory Authority (EPRA) said in an earlier statement the government will use the “Petroleum Development Levy to cushion consumers from the otherwise high prices.”

It is hoped that the government will once again use this clause to lower cost of fuel.

Apart from fuel, the ongoing global container shortage continues to affect importers, most of whom must wait longer to get merchandise as exporters struggle to find containers due to high demand.

The rich snap containers faster

The shortage follows rampant lockdowns especially in China that results in containers being left unattended in ports.

This shortage has made prices rise sharply with richer companies snapping them up to the disadvantage of the smaller exporters and importers.

Kenya’s imports from China include electronic goods such as mobile phones, laptops, television sets, toys, clothes and other durable goods such as steel, machinery, plastics and rubbers.

Shipping companies such as Mediterranean Shipping Company and Maesk say they are paying many times more to get containers but still it takes very long to secure the containers even after paying for them.

“It is very hard to get a container even if you have the money, plus container costs have increased by nearly 200 per cent, this means the prices of goods have to increase,” said an official at the Nairobi based Diamond Shipping Company.

Chinese one-month break

Kenya also imports food stuffs such as wheat, rice, maize, and many other processed foods which are packed in containers for shipping. 

It is important to note that Kenyan exporters also need these containers for their exports too and this means that they get them at higher prices hence cutting their returns.

The container shortages are expected to sharpen as demand rises especially for China commodities on expectations that the South East Asian nation will be proceeding for the New Year holiday for an entire month early next year.

However the flareups of the Coronavirus pandemic in China are the main concern with regard to availability of containers since they result in lockdowns which in-turn prevent exporters from accessing them or they get them at exorbitant prices hence raising prices to the end consumers.

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