Kenyans should tighten their belts after the Government dismissed possibilities of slashing fuel taxes or intervening through price controls.

Energy Minister Kiraitu Murungi told Parliament he would introduce price controls if the oil firms increased pump prices at rates not commensurate with international oil price changes.

But he said he would not reduce tax on imported crude oil, which constitutes more than 30 per cent of the total price.

According to the Minister, tax on Premium petrol is currently Sh29.29, Regular petrol Sh28.90, Diesel Sh19.70 and Kerosine Sh7.50.

Several MPs had demanded that the minister should cut fuel taxes. "Taxes have never been increased since June 2006 so there is nothing much that can be done on that," the minister said.

This came as motorists started paying more than Sh100 for a litre of fuel as oil marketers adjusted pump prices to reflect new crude oil costs.The move will further fuel inflation levels, which hit a 14 year high in April at 26.6 per cent, eating into the earnings of manufacturers who have seen their costs soar.

As fuel prices continue to rise, consumers should expect a surge in commodity prices since production costs will be pushed upwards. Manufacturers will then pass on the extra cost to consumers in the form of higher prices.

Yesterday, crude oil prices stood at $125 a barrel, boosted by increased demand. Analysts, warned that the possibility of $150-$200 a barrel over the next six-to 24 months was not remote.

Oil marketers adjusted their pump prices two weeks ago to Sh99.19 within the central business district, a year ago it cost Sh75.99 a litre.

The fresh price adjustment came with the problem of petrol pumps unable to accommodate five digits. By yesterday, most of the stations had fixed the problem to accurately reflect the price per unit.

The industry lobby, Petroleum Institute of East Africa (PIEA), says oil marketers have opted to stick to the four digits by rounding the figure to the nearest 10 cent to circumvent the technical glitch.

This means that gas stations which had intended, for instance, to charge 100.25 will now charge Sh102.2.

This is not the first time Mr Murungi is threatening to take action on petroleum marketers.

In October last year, the minister warned that he could invoke special powers to curb pump price escalation.

"In future, we hope to have strengthened the National Oil Cooperation to be selling the bulk of petroleum in Kenya, thus setting the prices," said Mr Murungi. Those powers are accorded to him under a new energy sector law that Parliament passed early this year.

The Energy Act, which became operational on July 7, gives the minister powers to determine retail prices of petroleum products.Oil marketers usually buy crude imports in dollars, and any strengthening of the shilling against the dollar is expected to bear currency gains.