A subsidy deployed by the State and a fall in the global prices and shipment costs of petrol, diesel, and kerosene have helped to lower local pump prices marginally, offering relief to consumers.
The pricing schedule that was published by the Energy and Petroleum Regulatory Authority (Epra) shows that the landed cost of the three fuels dropped by between 8.92 percent and 0.10 percent.
The state also applied a subsidy of Sh2.57 and Sh1.61 per litre of diesel and kerosene, respectively, helping lower the prices of the fuels but denying consumers of petrol a deeper price cut.
The price of a litre of petrol dropped by Sh2 to Sh182.52 while that of diesel and kerosene fell by Sh1 each to retail at Sh170.47 and Sh153.78 in Nairobi in the monthly pricing review to February 14th. Pump prices had remained unchanged since September last year.
“In the period under review, the maximum allowed petroleum prices for super petrol, diesel, and kerosene decrease by Sh2, Sh1, and Sh1 per litre, respectively,” Daniel Kiptoo, the director-general of the Energy and Petroleum Regulatory Authority (Epra), said on Wednesday.
The landed costs (price of fuel and shipping costs) of diesel dipped by 4.2 percent to $626.75 (Sh81,026.24) per tonne while that of petrol fell by 0.10 percent to $592.24 (Sh76,564.78).
Landed cost for a tonne of kerosene dipped the highest by 8.92 percent to $607.55 (Sh78,544.06). The commodity is mainly used by low-income households for lighting and cooking.
The state also used petrol consumers to subsidise diesel and kerosene prices, denying them a further drop of Sh1.59. The model, known as cross-subsidisation, allows the Exchequer to share the subsidy burden with consumers of at least one of the three grades of fuel.
This means that the price of a litre of petrol in Nairobi could have dropped by Sh3.59 to Sh180.93 had the state not used consumers of the commodity to cross-subsidise diesel and kerosene prices.
The fall in pump prices is expected to marginally ease inflation (a measure of the cost of living). Inflation remained unchanged at 4.5 percent in the last two months of last year.
Farmers, transporters, electricity producers, and other sectors of the economy factor the prices of fuel into the pricing of their goods and services. Diesel is the dominant fuel in the Kenyan economy.
The exchange rate that Epra uses to set the prices has remained unchanged at Sh129 to the dollar since January last year. Huge fluctuations in the exchange rate between the two currencies have a significant impact on fuel prices.
The government has in the past struggled to clear subsidy arrears owed to oil marketers, underscoring the decision to share the burden with consumers of one of the three grades of fuel.
Continued application of the subsidy contradicts President William Ruto’s declaration three years ago that his administration would discontinue subsidies on fuel and food products such as ugali flour.
