GOVT TO GIVE OUT FREE ESSENTIAL FOOD STUFF TO KENYANS

Surging prices are a tough matter, politically. Indeed, one years-ago analysis discovered no US president had ever been re-elected for a second term in a year when oil prices were rising.

Consumers do not appreciate paying more for the same items, and they move, immediately, to blaming their government, everywhere in the world.

However, this is a year of phenomenal prices rises, and it behooves all of us to deal with reality and frame our information with facts and genuine culpability.

For, only then, can we avoid paths of threatening arrests or vilifying anybody for price rises beyond their control. What we need to do, instead, is square up to the global price pressures in 2022 and identify the smartest possible solutions.

So, let’s start with oil prices. Talking to a friend last week, who was outraged at current oil pump prices, I took the time to fetch a graph of global crude oil prices. Oil prices prevail globally.

Russia is, just lately, talking of selling its oil and gas for a lesser price, as European buyers scramble to reduce their buying out of horror at funding a war machine killing thousands in neighbouring Ukraine. But that kind of differential pricing departure is rare.

As a rule, oil is traded on global commodity markets at globally prevailing prices and these do not vary by buyer. Oil isn’t sold more cheaply to Kenya than to Uganda or Rwanda, or than to the UK, or France, and when supplies get tighter, prices go up.

It’s a big debate why oil prices have surged so dramatically since the middle of last year, but has much to do with the declining investments in oil extraction as the world moves to renewable energy sources — just as Kenya has done, at a far greater pace than most other nations in the world, with its development of hydro-power, geothermal power, and even wind power.

Either way, a barrel of crude oil that cost around $60 in April 2021 by March 8 this year had topped $120. The climb, as a trend, has been inexorable, although the price does swing. In the last six weeks, it has roamed between $93 and $114.90 and last week closed at around $106. That’s a rise of around 75 percent, compared to a year earlier.

Now, these rises were well flagged. In Kenya, the government decided to subsidise the costlier petrol to ease the pressure on Kenyans.

Subsidies can be a wonderful economic tool to avert short-term hits that would damage the economy for years. But for long-term price changes, they are a soak away: and we have so many other competing priorities.

Nonetheless, the government made an agreement with oil marketers that they should sell petrol for less than the cost of buying it, and the government would then make up the difference.

Yet with or without the subsidies, and regardless of the prices paid at the pumps, oil marketers are paying 75 percent to 100 percent more for the oil they are bringing into Kenya, and have never had strong profit margins.

Yet, as our nation, just like every other nation, now addresses how to mitigate the impact of the global surge in world oil prices, it faces a threatening array of surging food prices too, and Kenya, very unfortunately, considering its enormous potential to grow enough food for all our country and others besides, imports a lot of its food.

But fertiliser is in extremely short supply globally, and that’s set to get worse, pushing down productivity everywhere.

Ukraine, which delivers a lot of our wheat, is managing to plant in some areas, but those villages that get bombarded to smithereens and see 16-year-old girls raped and shot in the back of the head, used to be the homes of farmers, who can’t plant in those conditions.

So Kenya’s discourse can go various ways on this. We can attack hoarders and middlemen, we can pour our limited public funds into subsidies, we can do all sorts of things.

But oil and food prices are rising. And that means we should be planting everything we can, making our own fertilisers, and replacing petrol.

By Business today

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