Kenya: Petrol Price Jumps To Record High As Gov’t Scraps Subsidies

Kenya has removed subsidies on petrol (gasoline) thereby pushing the price of the commodity to a record high in the East African nation.

As a result, the price of petrol has gone up by Ksh20 to KSh179.30 ($1.49) per litre.

The Government retained a subsidy of Kshs.20.82/litre and Kshs.26.25/litre for diesel and kerosene respectively.

Consequently, a litre of diesel will be sold at Kshs 165.82 ($1.38) while kerosene will be sold at Kshs147.94 ($1.23) per lire.

A statement issued by Energy and Petroleum Regulatory Authority (EPRA) noted that the new price regime will remain in force until October 14.

Last month, the subsidy shielded the prices of petrol from jumping to Sh214.04 per litre up from Sh159.12.

This, in effect, helped to lower the cost of diesel as it would have also jumped to Sh206.17 up from Sh140.03, while that of kerosene would have also gone up to Sh202.11 up from Sh127.94.

Kenyan new president, William Ruto, during his inauguration last Tuesday, vowed to withdraw the fuel subsidy that has kept prices stable since July.

The President said he would do away with subsidies on fuel and food, arguing that they are a huge burden to the exchequer and often lead to product shortages.

“In addition to being very costly, consumption subsidy interventions are prone to abuse, distort markets and create uncertainties including artificial shortages of the very products seek to subsidise,” he said.

EPRA had not adjusted these pass-through costs—the Fuel Cost Charge (FCC), Foreign Exchange Rate Fluctuation Adjustment (Ferfa) and Water Resources Management Authority (Warma) levy—since December 2021.

The FCC is the single largest variable electricity cost adjusted monthly and is collected by Kenya Power to be reimbursed to thermal power generators for their fuel purchases used to generate power.

With the brakes off fuel subsidy, the withdrawal of the subsidy on electricity has pushed its cost to the highest level in months heavily hitting households, businesses as well as industrial consumers.

The high fuel prices could, however, avert a fuel shortage crisis that has been brewing for weeks.

The Kenya Pipeline Company (KPC), last week, sounded the alarm over an imminent fuel shortage due to the failure of oil marketing companies to pick up fuel cargo from importers due to a lack of money to pay for the cargo.

The withdrawal of the subsidy will now avert the fuel shortage, with oil marketers handed a new lifeline with the new higher prices as they will collect their money upfront.

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