Petroleum Principal Secretary Andrew Kamau told MPs that the global rally in crude prices has piled pressure on the fund which is fast being depleted.
The government will pay marketers Sh23.29 per litre of diesel which is an increase of Sh7.61 from the review lapsing on December 14 and Sh15.88 per litre of kerosene, an increase of Sh4.31 from the December review.
The compensation margins for super have marginally increased to Sh14.53 per litre in the current review from Sh13.76 in the monthly pricing review to December 14.
The government is struggling to pay oil marketers for the high cuts on their margins to keep pump prices unchanged, making future the fuel subsidy scheme uncertain.
Petroleum Principal Secretary Andrew Kamau told MPs that the global rally in crude prices has piled pressure on the fund which is fast being depleted.
The government will pay marketers Sh23.29 per litre of diesel which is an increase of Sh7.61 from the review lapsing on December 14 and Sh15.88 per litre of kerosene, an increase of Sh4.31 from the December review.
The compensation margins for super have marginally increased to Sh14.53 per litre in the current review from Sh13.76 in the monthly pricing review to December 14.
“The huge deltas to be compensated between the stabilised prices and actual prices compared to the low collections is posing a serious challenge to the subsidy,” Mr Kamau told the National Assembly committee on Energy Wednesday.
Removal of the subsidy would push fuel costs through the roof at a time global crude prices have been on a steady rise and hit a seven-year high of $94.45 per barrel yesterday.
Consumers would be paying Sh133.89 instead of the current Sh110.6 per litre of diesel and Sh144.25 instead of Sh129.72 per litre of super in the monthly review lapsing March 14 if the State had not tapped the subsidy.
Mr Kamau disclosed that had Sh1.277 billion last week and come under increasing pressure to foot compensation costs for oil marketers for the cut on their margins.
Treasury has so far collected Sh55.717 billion from the Petroleum Development Levy fund in the four years since the 2018/19 financial year.
The margins to be paid this month are based on the average of $82.03 a barrel, underlining the importance of the subsidy in the wake of the global rally in global prices of crude.
The strain on the kitty is set to increase in the coming months on the continued rise in prices of crude globally amid a tight supply and fresh fears of supply disruptions in the wake of the Russia-Ukraine standoff.
On Tuesday, oil prices hit their highest level since 2014, reaching $96.26 a barrel due to tensions over the possibility of Russia invading Ukraine.
If the Ukraine crisis deteriorates, oil and gas supplies from Russia to Europe may be interrupted, pushing up wholesale prices further.
Kenya has since April last year tapped the fuel subsidy to keep prices unchanged amid fears that a spike in pump prices that have a direct impact on the cost of goods and services could stoke public anger.
The subsidy scheme is supported by the Petroleum Development Levy that was raised to Sh5.40 per litre of super and diesel from Sh0.40 in 2020.
