Oil crosses $100: What does it mean for fuel prices in Kenya?

Oil has crossed $100 a barrel again.

For Kenya, that is not simply an international markets story.

It can eventually affect the price of commuting to work, transporting vegetables to Nairobi, manufacturing goods and generating electricity.

Brent crude climbed above $100 on Wednesday as fighting between the United States and Iran intensified and attacks threatened shipping around the Strait of Hormuz.

Reuters reported Brent reaching $100.95 during Wednesday’s trading.

Why does that matter to Kenya?

Kenya imports petroleum products, meaning international energy prices form an important part of the eventual cost of fuel.

But a rise in crude does not mean petrol prices at Kenyan pumps automatically rise by the same percentage tomorrow.

The Energy and Petroleum Regulatory Authority calculates monthly maximum retail prices using several components, including imported product costs, taxes, levies, transport and distribution margins.

There can therefore be a lag between an international oil shock and what motorists pay locally.

The bigger concern is duration.

A short spike can disappear before its full effect travels through the pricing system.

A sustained period above $100 is different.

The current escalation is particularly serious because of the Strait of Hormuz.

The narrow waterway connects Gulf producers to international markets and normally carries roughly a fifth of global oil supply. Reuters says the conflict has already removed significant volumes from the market.

For Kenya, expensive fuel can spread through the economy.

Matatu and bus operators face higher operating costs.

Farmers pay more to transport produce.

Factories face higher logistics and energy expenses.

Airlines pay more for aviation fuel.

Businesses may eventually pass some of those costs to consumers.

That is how an oil crisis thousands of kilometres away can contribute to the price of food in Nairobi, Kisumu or Mombasa.

The second risk is foreign exchange.

Petroleum is a major import. A larger fuel import bill increases demand for foreign currency and can add pressure to the external account.

The third is inflation.

Global markets fell on Wednesday partly because investors fear expensive energy could keep inflation elevated and force central banks to maintain higher interest rates.

For Kenyan households, therefore, the important number is not whether Brent touched $100 for one day.

It is how long it stays there.