The sharp rise in fuel prices since the start of the year shifts the spotlight on a delayed fuel subsidy plan despite the State collecting more than Sh12 billion from homes and businesses to stabilize diesel prices.
The Energy and Petroleum Regulatory Authority (Epra) said that the regulations to manage the subsidy were not yet ready despite the State having collected billions of shillings from motorists since July.
Under the subsidy scheme that excluded petrol and started in July Kenyans were not expected to bear costs of diesel prices above $50 a barrel.
Petrol prices have hit a nine-year high on rising crude costs in the global market, piling inflationary pressure on the country’s economy.
Motorists in Nairobi will pay Sh122.81 per litre of diesel from Sh115.18, representing a Sh7.63 increase, and Sh5.75 more for a litre of super petrol at Sh107.66.
The Energy and Petroleum Regulatory Authority (EPRA) linked the expensive fuel to the recovery in crude oil prices, which increased the cost of imported refined fuel, from $55.27 a barrel to $61.61 and low $17.64 in April last year.
Petrol will for the next month retail at level last seen in November 2011 while diesel is selling at the highest level since December 2018.
The sharp rise in fuel prices since the start of the year shifts the spotlight on a delayed fuel subsidy plan despite the State collecting more than Sh12 billion from homes and businesses to stabilize diesel prices.
The Energy and Petroleum Regulatory Authority (Epra) said that the regulations to manage the subsidy were not yet ready despite the State having collected billions of shillings from motorists since July.
Under the subsidy scheme that excluded petrol and started in July Kenyans were not expected to bear costs of diesel prices above $50 a barrel.
“The Free on board price of Murban crude oil lifted in February 2021 was posted at $61.61 an increase of 11.47 per cent from $55.27 per barrel in January,” said Epra yesterday while announcing prices that will last till April 14.
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, unleashing pricing pressure across the economy with ramifications on the cost of living measure.
In Kenya, for instance, the majority of the population relies on kerosene and gas for lighting and cooking, making crude price a key determinant of the rate of inflation.
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.
Inflation rose from 5.8 per cent in February from 5.7 per cent in January, largely driven by cheap fuel and food prices.
Petrol prices have jumped Sh15.82 over the past two months, making it one of the biggest jumps over the period since 2007 when official data on fuel prices are available.
Kerosene prices rose to Sh97.85 in the capital city, up from Sh92.44 in February, reflecting a Sh5.41 rise.
Crude prices have soared to pre-virus levels in recent weeks, driven higher by the production cuts by the OPEC nations and the mass rollout of Covid-19 vaccines in many high-income countries.
While demand for oil is still lower than normal, there are hopes of a speedier than expected economic recovery as vaccines are rolled out.
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