Kenya dips into stabilisation fund to prevent rise in pump prices

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Vehicles line up to fuel up at a petrol station within Nairobi on July 1, 2023. PHOTO | FRANCIS NDERITU | NMG

The State Tuesday tapped into the fuel stabilisation fund for the first time since October last year to stop an increase of pump prices by up to Sh2.27 per litre.

The cushion lowered super petrol prices per litre in Nairobi marginally to Sh192.84 from Sh193.84 previously.

Diesel, whose prices were not covered, dropped to Sh179.18 from Sh180.38 in the review that takes effect today (Wednesday) until June 14. Without the cushion, the price of petrol would have jumped by Sh2.27 per litre.

The last time stabilisation was applied was in the October-November 2023 cycle. This came at a time when prices of super petrol in the global market rose by five percent to $927 per tonne from $881.11 last month while prices of diesel increased by 1.4 percent to $737.49 per tonne. The shilling also marginally weakened against the dollar with the energy regulator applying an exchange rate of 134.63 units in yesterday’s price review, compared to the 133.54 units used last month.

“In the period under review, the maximum allowed petroleum pump price for super petrol, diesel and kerosene decrease by Sh1 per litre, Sh1.20 per litre and Sh1.30 per litre respectively,” Daniel Kiptoo, Director General of the Energy and Petroleum Regulatory Authority (Epra), said yesterday.

A combination of the weakening shilling and rise in global prices of refined fuel had set the stage for higher pump prices for super petrol and kerosene, prompting the re-introduction of the subsidy.

Pump prices have since December last year been on a sustained drop amid a global fall in prices of Murban crude.

Strengthening of the shilling against the dollar since February then significantly aided the drops in local pump prices, helping the government lower prices without using the stabilisation fund.

The latest prices are expected to marginally ease inflation given the integral role of diesel in determining prices of goods and services.

Diesel is the main fuel used by transporters, manufacturers and power producers. Inflation –a measure of the cost of living— dropped to five percent last month compared to 5.7 percent in March. Yesterday’s price cut is however the smallest since the monthly review for February this year when prices for super petrol and diesel fell by Sh1 per litre for each of the two grades of fuel.

The government phased out fuel subsidies amid increased pressure on the Exchequer and calls from key financiers notably the International Monetary Fund in favour of the stabilisation fund, which is collected from the Petroleum Development Levy (PDL)

The Organization of the Petroleum Exporting Countries (Opec) said there was a chance the world economy could do better than expected this year. Opec on Tuesday said that it expected world oil demand to rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd next year. Both forecasts were unchanged from last month.

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