Consumers of super petrol have once again been denied a price drop of Sh8.54 per litre after the State opted to share the burden of subsiding diesel in a strategy to keep pump prices low.
The Energy and Petroleum Regulatory Authority (Epra) on Wednesday said that consumers of super will pay Sh8.54 per litre to cushion diesel users after the State opted to extend the fuel subsidy into the New Year.
The State gave diesel consumers a subsidy of Sh19.39 a litre, with the motorists using super footing nearly half of the amount in a bid to ease the State’s burden in catering for the subsidy that is key to containing inflationary pressure.
Without the subsidy, a litre of diesel would have been Sh181.39 from the current Sh162 in Nairobi while that of super would have dropped to Sh168.76 per litre from the current Sh177.30.
The unchanged prices come despite the cost of refined diesel jumping due to a spike in global costs of the commodity at a time the price of crude oil dropped to $92.45 (Sh11,482.29) per barrel from $98.06 ( Sh12,165,32) last month.
“The price of diesel has been cross-subsidised with that of super petrol while a subsidy of Sh25.07 per litre has been maintained for kerosene in order to cushion consumers from the otherwise high prices,” Epra Director General Daniel Kiptoo said.
Fuel prices are key determinants of inflation highlighting why the government has opted to extend the subsidy despite struggles to pay oil marketers.
Dealers have not been compensated for months highlighting the government’s delicate balance of opting for disquiet from the sector but containing public outrage over the high cost of basic goods.
The government has defied calls from the International Monetary Fund to end the subsidy despite the budgetary disruptions caused by the fuel stabilisation scheme.
Inflation dropped slightly last month to 9.5 per cent from 9.6 per cent in October but still remains above the government’s target range.
The high cost of living has squeezed the budgets of households prompting the new administration to opt for an extension of the fuel subsidy in a bid to contain simmering public anger.
The Kenyan economy is diesel-driven and farmers, manufacturers of goods and service providers pass the increased costs of fuel to consumers in the form of higher prices.
President William Ruto had at his swearing-in said that the fuel subsidy will be scrapped because of the budgetary disruptions and causing artificial shortages due to sector disquiet over delayed compensation from the government.
Epra discontinued the subsidy on super in the first month of the new administration but opted to continue with that for diesel and kerosene in a bid to cushion the majority who use the two fuels.
Kenya has found herself in a unique situation where the price of refined diesel is higher than that of super forcing the government to share the burden of the subsidy with super consumers.
The cost of super that landed at Mombasa increased by 2.65 per cent to $704.21 per cubic metre while that of diesel jumped by 6.56 per cent to $920.44 per cubic metre and kerosene rose 6.01 per cent to $851.31 per cubic metre.
Diesel markets were already stretched before Russia’s invasion of Ukraine because of the closure of 3.5 million barrels a day of refinery capacity since the start of the Covid-19 pandemic.