Compensation for diesel will be highest at Sh4.82 billion followed by that of super petrol at Sh3.03 billion and kerosene at Sh0.26 billion based on the average consumption of the three fuels.
Industry regulator Energy and Petroleum Regulatory Authority (Epra) retained the margins for suppliers at zero per litre of super, diesel and kerosene in the latest review for the second month running.
The State will pay oil marketers an estimated Sh8.12 billion for keeping fuel prices unchanged in the monthly review that will lapse on January 15.
Compensation for diesel will be highest at Sh4.82 billion followed by that of super petrol at Sh3.03 billion and kerosene at Sh0.26 billion based on the average consumption of the three fuels.
Industry regulator Energy and Petroleum Regulatory Authority (Epra) retained the margins for suppliers at zero per litre of super, diesel and kerosene in the latest review for the second month running.
It also cut petrol prices by Sh4.57 a litre, diesel Sh7.90 and Kerosene Sh9.43 —keeping the costs of the products unchanged at Sh129.72, Sh110.60 and Sh103.54 in Nairobi respectively.
This was meant to cushion motorists from rising global fuel prices on the back of a speedier than expected economic recovery as vaccines are rolled out.
Without the subsidy, super petrol would have hit a historic high of Sh148.04 a litre, diesel Sh132.49 a litre and kerosene Sh127.07 a litre in what would have reignited public anger over the increased cost of living.
“We will compensate dealers at Sh18.32 per litre of super, Sh21.89 per litre of diesel and Sh23.53 per litre of kerosene. It is high because apart from taking away margins, there is also the compounding effect of the increase in landed costs,” Epra Director-General Daniel Kiptoo told the Business Daily last evening.
In addition to compensating marketers for the cut on their margins, the State will foot the increased costs of importing the refined fuel borne by them.
Crude oil prices rallied to Sh8,246 ($73.41) per barrel from Sh7,747 $69.73 per barrel in October.
Oil dealers who sought anonymity for fear of State reprisal have been complaining that the State has not fully compensated the full costs incurred in the importation of fuel.
The State will tap funds from the fuel subsidy scheme that is supported by the Petroleum Development Levy (PDL).
PDL is raised from fuel consumers and was increased to Sh5.40 a litre in July last year from Sh0.40, representing a 1,250 percent rise.
The fund is meant to cushion consumers from volatility in fuel prices but has also seen motorists lose out when paying the Sh5.40 for a litre at the pump.
The costs of energy and transport have a significant weighting in the basket of goods and services that is used to measure inflation in the country.
Producers of services such as electricity and manufactured goods are also expected to factor in the higher cost of petroleum.
The economy also uses diesel for transportation, power generation and running of agricultural machinery such as tractors, with a direct impact on the cost of farm produce.
