Cooking gas prices reached a new high of Sh3,231.84 for a 13-kilogram cylinder in March. This increase happened despite the government’s efforts to reduce costs by removing the eight percent value-added tax.
Currently, only 13% of Kenyans use cooking gas, with most relying on charcoal and firewood due to high gas cylinder costs and limited rural distribution infrastructure.
The government aims to achieve universal access to clean cooking solutions by 2030, transitioning to cleaner technologies like LPG and biogas.
However, the adoption of LPG as a clean cooking solution is lagging, with the government focusing on reducing costs and increasing usage among lower-income groups.
The recent reintroduction of a 16% VAT on LPG in 2021 has led to a decrease in LPG consumption, pushing households towards polluting alternatives like charcoal and wood, particularly impacting resource-poor families and informal workers.
This VAT reintroduction has worsened inequalities in access to clean cooking fuels and is expected to have significant economic and environmental consequences in Kenya.
The high prices of cooking gas in Kenya are caused by several factors. One major factor is disruptions in the supply chain.
Kenya relies entirely on imports for its LPG, mostly from the United States. In 2021, Kenya imported 371,000 metric tons of LPG, valued at $111 million for butane and $25 million for propane.
Other factors, like the weakening of the local currency, higher demand, and inefficient distribution systems also contribute to the rising prices.
Global market trends also play a role. The global LPG market saw a big drop in 2022, with a decrease of X% compared to the previous year.
Forecasts predict market trends up to 2030, showing opportunities and trends in the global LPG market.
Regulatory factors are another issue. The reintroduction of a 16% VAT on LPG in 2021 made LPG less affordable for many Kenyans, widening the gap in access to clean cooking fuels.
The planned reinstatement of value-added taxes (VATs) on LPG from July 2021 will further reduce affordability, especially for low-income families and informal workers.
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Local demand also drives up prices. Kenya aims to achieve Universal Access to Modern Energy Cooking Services by 2030, with LPG making up 35% of the total mix. This goal increases the demand for LPG in Kenya, which could create opportunities for increased exports of butane and propane from the US. US firms in this sector are encouraged to explore the Kenyan market.
Consumer responses to high cooking gas prices in Kenya include changes in purchasing patterns.
The cost of refilling a 13-kilogram cylinder reached KSh 3,031 in November 2023, similar to June 2023 when the eight percent VAT was last applicable.
Consumers are also shifting to cheaper alternatives like firewood, charcoal, and kerosene, despite health and environmental risks. Some are sharing videos online on how to make cooking gas last longer.
The price surge is impacting household budgets, especially for low-income families. Consumers are coping by reducing consumption, switching fuels, or finding cheaper suppliers.
The government is promoting clean cooking solutions, but the high cost of LPG remains a barrier, especially for low-income households.
The cooking gas industry in Kenya is tackling record-high prices with pricing, competitive, and sustainability strategies.
The government has reduced VAT on LPG and initiated a subsidy scheme. Industry efforts include adjusting pricing models, improving storage, offering tax incentives, and promoting LPG use.
Competitive strategies focus on maintaining market share, with a directive for public institutions to switch to LPG.
Sustainability initiatives aim to achieve Universal Access to Modern Energy Cooking Services by 2030. These actions aim to ease the financial burden on consumers, promote clean cooking fuels, and ensure a sustainable future.
The cooking gas industry in Kenya faces challenges with record-high prices, with only 13% of Kenyans using LPG for cooking.
To ensure affordability, several strategies can be implemented. Encouraging more market players can increase competition and reduce monopolies, leading to lower prices and better distribution.
The government has also implemented a subsidy scheme for LPG, distributing 60,000 six-kilo cylinders to support access during the international price crisis. Kenya plans to construct a 30,000-ton LPG handling and storage facility in Mombasa to reduce costs and increase usage among lower-income groups. Addressing wider investment barriers can further promote competition and lower prices.
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