Kenyans will face substantial hikes in fuel prices every month for the rest of the year as the shilling weakens and oil exporters reduce supplies by around three million barrels per day, pushing up prices globally.
The Energy and Petroleum Regulatory Authority (EPRA) confirmed an increase in the price of super gasoline by KSh16.96, diesel by KSh21.32, and kerosene by KSh33.13 on Friday, causing Kenyans to experience the largest monthly price adjustment hike to date. The three goods are currently being sold in Nairobi for KSh211.64, KSh200.99, and KSh202.61, respectively.
“Going forward, we are likely to be going through harder times because these are Platt prices from OPEC (the Organisation of the Petroleum Exporting Countries), and there’s nothing much we can do about them.” Energy Cabinet Secretary Davis Chirchir testified before the National Assembly’s Energy Committee and acknowledged that the government had no control over the increase in fuel prices.
Moses Kuria, Chirchir’s counterpart in the Ministry of Trade and Industry, agreed, stating that petrol prices will “go up by KSh10 every month until February.”
According to Kenya’s Energy and Petroleum Regulatory Authority (EPRA), this has been intensified by inadequate revenue from the Petroleum Development Levy (PDL), from which funds to stabilize prices were withheld last month. Epra stressed that the moderate mechanism was not a subsidy but rather a price stabilization made possible by the Petroleum Development Levy (PDL).
EPRA further explained that the Kenyan government is facing a monthly shortfall of KSh5 billion due to a levy collection shortfall of KSh2.3 billion in July and KSh2.5 billion in August. This shortage will necessitate the Treasury finding alternative money to pay unremitted payments to oil marketers. The withdrawals from the stabilisation fund are not budgeted for in the fiscal year 2023–24.
“We had an increase in diesel prices in July, but we were able to protect customers in August. We have a lot of issues to deal with this month of September as a result of rising world prices, which is why there are so many spikes,” Secretary of the Petroleum Principle, Mohamed Liban, said.
President Ruto stated that he would prefer to subsidize production rather than consumption because subsidies are unsustainable and prone to abuse. After gaining office, his administration gave in to IMF pressure to eliminate subsidies to reduce the burden of debt service on the national Treasury.
Kenya’s efforts to negotiate cheaper fuel through a government-to-government (G2G) arrangement have not yielded the expected benefits, reducing the cost of living for locals. The government managed to renegotiate freight and premiums for petrol and diesel to $90 per cubic meter in a G2G deal with Saudi Arabia, the world’s largest crude exporter.
Saudi Arabia and Russia agreed to extend the removal of 1.3 million barrels of crude per day from the global market. The deal with Saudi Aramco will supply Kenya with diesel and petrol for six months, while Abu Dhabi National Oil Company will deliver three consignments of super petrol monthly.
The government now wants to step back from the G2G plan upon its expiration and return to the previous open tender system (OTS) after the IMF, which has been increasingly shaping Kenya’s policies, also warned the deal posed debt exposure risks.
Kenya’s economy is powered by diesel, which has an impact on the three major sectors that determine the cost of consumer goods: manufacturing, transportation, and agriculture. Nairobi’s Public Service Vehicles (PSVs), for instance, have increased their prices by at least KSh20, demonstrating the immediate impact that the gasoline price adjustment has on those prices.
Kenya’s proposed increase in VAT to 18% next year is aimed at aligning it with other East African Community countries. Currently, high taxes have led to steep fuel price increases for Kenyans and Ugandans. In Uganda, a litre of diesel is shs.5400 (KSh212).
