| dc.description.abstract | The last half decade has seen extraordinary price fluctuations in the Kenya's oil market. Equally,
the exchange rates (especially US dollar to Kenya's Shillings) have been characterized by
significant fluctuations with the local currency hitting historical lows. Oil price levels can affect
the world economy in many different ways. An increase in the oil price will raise the cost of
production of goods and services in the economy so it will lead to an increase in price levels.
Kenya adopted a floating exchange rate regime in 1993. Since then the exchange rates have been
determined by the market forces of demand and supply. Undoubtedly, the changes in exchange
rates do have a diverse effect across the economic spectrum in any country. This study was
carried out to determine the effects of foreign currency exchange rate fluctuation on retail fuel
prices in Kenya. The study used a quantitative descriptive research design. The target population
for this study constituted the four main oil products retailed at the service stations namely
Premium Motor Gasoline (PMS), Regular Motor Gasoline (RMS), Automotive Gas Oil (AGO)
and Illuminating Kerosene (lK). This study analyzed average monthly retail prices for PMS,
RMS, AGO and IK for Nairobi region for two and half years between January 2011 and June
2013. The study also analyzed the Central bank's monthly US Dollar to Kenyan Shilling
exchange rate for the same period of study. The analysis on the movement of the two variables
indicates a change in the same direction, a confirmation that indeed a change in foreign currency
exchange rate affects retail fuel prices in a similar manner. This study however concludes that
fluctuations in foreign currency exchange rate alone will not highly affect the retail oil prices in
Kenya. The study is therefore consistent with previous studies that suggest that many other
factors including taxes, spillage, dealer margins, transport rates as well as speculation determine | en_US |
