A rise in the price of petrol at the pump and costly fertilisers are just the beginning in the wake of the Iran war.

The loss of some 20 percent of the world’s energy supplies has already been called the “greatest global energy security threat in history” by the International Energy Agency.

The agency has warned that today’s crisis could dwarf the combined effects of the oil shocks of the 1970s — which caused several years of inflation, recessions and fuel rationing.

This will hit Kenyan consumers hard after pump prices skyrocketed this month.

The disruptions have seen local pump prices hit record levels, with a litre of petrol jumping from Sh166.54 to Sh197.60 as the price of diesel rose to Sh196.63 from Sh166.50 for the month to May 14, despite government subsidy and halving of value-added tax to eight percent.

Food production will be damaged by fertiliser shortages, which will lead to further inflation, hurting workers whose pay rises have failed to keep pace with the cost of living measure over the past six years.

A kitty that cushions Kenyans against costly fuel is set to come under pressure in the coming months as suppliers warned the cost of diesel and petrol will go even higher for consignments covering the May-August period.

One supplier under the Government-to-Government arrangement reckons that the US-Iran war has forced it to change the terms of the deal and will deliver its consignment from May at a higher price.

This is a signal that pump prices will surge as the kitty that the State uses to subsidise fuel prices depletes.

Global analysts have warned that oil and gas prices will not go down any time soon even if the Iran war ends, citing pressure on fuel supplies and tight global markets.

Aramco Trading Fujairah (ATF) has written to Kenya, stating that its sourcing of petroleum products from “other locations” has come at higher costs, which it would push to Kenya.

The shocks have piled pressure on inflation, with the Central Bank of Kenya forecasting that the rate could average above 6.2 percent if the Middle East crisis persists for at least three months. Inflation rose to 4.4 percent in March from 4.3 percent in February.

“With the oil price shock and assuming that the conflict lasts for the next three months, the forecast overall inflation does go above the five percent mid-point, peaking in July 2026 after which it progressively declines,” said Dr Thugge on April 14.

→palushula@ke.nationmedia.com

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