The prices of petrol in Kenya will rise to the highest levels in the history of the East African nation. This is unless the Kenyan government decides to subsidize the increasing costs of crude oil which might escalate the public’s outcry over the increasing costs of living.
According to estimates by oil marketers fuel prices could increase by as much as 40 Kenyan Shillings per litre if subsidy is absent. This will also move the cost of Diesel and Petrol in Nairobi to 155.60 Kenyan Shillings per litre and 174.72 Kenyan Shillings per litre resulting in the highest fuel prices in the long history of the country.
It is believed that the Kenyan government can provide a fragmentary subsidy just like what was done in March of 2022, so as to reduce the effects of the increase in fuel prices at a time when oil dealers in the country are looking to reduce the Kenyan government’s aid which has been singled out as the reason for the shortage in fuel that has gone on for weeks.
According to Business Daily Africa a Chief Executive Officer (CEO) of a major oil marketer made it known that, “Without the subsidy, the prices are likely to jump by up to Sh40 a litre based on the cost of cargos that were shipped this month.”
In March of 2022 the Kenyan government partially removed the fuel subsidy it had put in place in 2021. This resulted in the Petrol prices and Diesel prices reaching all time highs in the first increase that occurred since October of 2021.
The less stronger subsidy plan resulted in the Energy and Petroleum Regulatory Authority (EPRA) increasing the prices of Petrol and Diesel by 5 Kenyan Shillings per litre resulting in a final price of 134.72 Kenyan Shillings per litre and 115.60 Kenyan Shillings per litre respectively after its monthly review.
A litre of Petrol would have without the subsidy, risen to 155.11 Kenyan Shillings per litre. Diesel would have been 143.16 Kenyan Shillings per litre of Diesel. The 40 Kenyan Shilling increase would have resulted in Petrol retailing at 174 Kenyan Shillings per litre and Diesel retailing at 155 Kenyan Shillings per litre, putting significant strain on the consumers.
The costs of transport and energy play vital roles in the goods and services used to calculate inflation in Kenya. The worry regarding an increase in prices is occurring at a time when the Kenyan government is actively looking at solutions to the still ongoing fuel shortage.
The fuel shortage is coming at a time when uncertainties abound over the subsidy ahead of the monthly review.
Areas outside of Nairobi have also experienced fuel shortages.
According to reports Oil dealers believe that the fuel shortages are as a result of uncertainty regarding the fuel subsidy introduced by the government in April of 2021 to help stabilize the prices during suspicions of hoarding.
Delays in subsidies led to an increase in prices for the wholesale market where Oil dealers resell the fuel to smaller fuel retailers who are independent and who control 40 percent of the market.
As a result of this the smaller fuel retailers became hesitant to purchase the more expensive fuel. Oil majors were also unable to effectively handle the deficit.
Oil majors have also exercised caution with regards to increasing supply due to uncertainties about whether or not the Kenyan government will adequately compensate them for the supplies not used to calculate the monthly price adjustments that took effect on the 15th of April 2022 and will be in place for a period of one (1) month.
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