Roundup: Gas use in Kenya up 240 pct as low earners embrace the fuel

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Liquefied Petroleum Gas (LPG) consumption in Kenya has swelled over 240 percent a month compared to a similar period a year ago, boosted by low global oil prices and removal of value added tax (VAT) on the commodity.

Kenyan citizens are consuming at least 17,000 metric tonnes (MT) of LPG (cooking gas) a month, up from 5,000 MT tonnes a year earlier, latest data from the Ministry of Energy showed Friday.

The government in the June budget removed the 16 percent VAT it had imposed on the fuel to boost consumption.

The move pushed the cost of cooking gas that had averaged 22 U.S. dollars for a 13kg cylinder to between 18 and 21 dollars. On the other hand, the 6kg cylinder is retailing at an average of 9 dollars, with independent dealers offering as low as 8 dollars.

The low prices have come as a boost to consumers pushing up use to an all-time high of over 17,000 MT a month.

According to the Ministry of Energy data contained in the June economic report by Kenya National Bureau of Statistics, use of the energy has been on the rise since January, where it stood at 14,000 MT.

In February and March, consumption averaged 15,000 MT before swelling further to 16,000 MT in April and to peak at 16,690 MT in May.

With removal of the tax and the low global oil prices, citizens' use of the energy currently stands at over 17,000 MT a month.

Those who have raised consumption, according to analysts, are mainly low income earners who are taking advantage of the reduced prices.

"For several years, cooking gas use averaged 5,000 MT a month, which means there are certain families, mainly those in the middle and upper income groups, that use it consistently whether prices rise or go down," said Henry Wandera, an economics lecturer in Nairobi.

Uptake by low income and some middle-income families is responsible for the over 10,000 MT surge a month.

"Households are turning to the fuel which is cleaner, convenient and now cheaper compared to kerosene, charcoal or firewood. The low prices are certainly the pull-factor in the LPG mix."

Dealers confirmed Friday that a good number of their customers have dusted and refilled their cooking gas cylinders that they have not used for years.

Abel Kariuki, a gas dealer in Donholm on the east of Nairobi, noted that many people he is selling the commodity to have gave up on it when prices were over 20 dollars.

"Consumers are really enjoying the cheaper prices, which are still coming down because dealers are even selling at 17 dollars as competition stiffens," said Kariuki, noting consumers are the biggest beneficiaries of the price drops.

However, as prices continue to tumble, Kariuki has crossed his fingers that they do not drop so low to drive them out of business.

"My hope is that prices do not go below 15 dollars because that may make the business unprofitable since several business costs, for instance transport, have not come down," said Kariuki. Endit

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