Crude oil prices soared to $100 Sh6,500) a barrel on Wednesday for the first time, with international demand for oil and petroleum products threatening to outstrip supplies.
Several service stations around the country have been closed down for fuel shortage and incidences of looting.The situation in the country is further compounded by the post-election tensions that are threatening to tear the country apart.
Several service stations across the country have been closed as a result of fuel shortages and others for the fear of looting.
Those that are open charge dearly for petrol. The country has registered a surge in fuel prices for the last four months and currently, a litre of petrol trades at between Sh75 and Sh85.
At one point, Energy minister Kiraitu Murungi threatened to invoke the price control powers of his office in a bid to tame arbitrary increases.
The ripple effect of the shortage in Kenya has already started taking its toll in neighbouring Uganda where prices have jumped from Sh75 a litre to about Sh300 a litre.
Rwanda and Burundi, which also depend on Kenya for their supplies, have also started choking on the effect.
Experts are attributing the soaring prices to progressing economies of China and India with higher demands of oil, while tensions in oil producing nations like Nigeria and Iran have increasingly made investors nervous, driving prices even higher.
Oil dealers, however, argue their case on the additional costs they incur in refining and ferrying the commodity.
The transport sector in early November reviewed commuter fares to adjust to the increasing oil prices both locally and internationally. The oil shortage in the country has also been heightened by lack of transport. A number of roads have been barricaded either by the police or irate mobs making it hard for oil to reach consumers.
Local oil firms had earlier in the week warned of tough times ahead in the face of the crisis. Already the country is in a near-crisis over shortages of cooking gas. Airlines plying local routes have also suspended their operations to western parts of the country due lack of jet fuel.
A weakening US dollar, which makes oil more affordable to buyers in stronger currencies, is also cited as a factor for the rise in prices. Meanwhile, oil held near its lifetime high of $100 a barrel on Thursday, fuelled by expectations of another fall in US fuel stocks and a struggling dollar.
Its rise to triple digits may help push top consumer the United States — battered by a housing crisis and credit crunch — into recession. European Union economies could also suffer if the spike is prolonged, said the European Commission.
But after rising 57 per cent in 2007, oil and other commodities may push higher still, analysts said.