Prepare response to fresh fuel price hikes

Fuel prices at a petrol station in Nyeri town on September 15, 2022 hours after Energy and Petroleum Regulatory Authority reviewed the rates. PHOTO | JOSEPH KANYI | NMG

The Ruto administration made clear its intention to eventually retire the fuel subsidy plan with the partial cuts announced mid-last month.

Presumably, the decision was well received among the big oil marketers that have been unhappy with the management of the price stabilisation programme introduced by the previous administration in April 2021. The oil companies frequently complained about delayed compensation for keeping pump prices unchanged.

For its part, the government of former President Uhuru Kenyatta resisted the pressure from the International Monetary Fund to leave the prices of petrol, diesel and kerosene to the market forces of supply and demand, fearing the possibility of social unrest in an electioneering period.

President William Ruto may not be overly concerned about any political repercussions. But his government’s early plans to bring down the cost of living will surely be tested by the anticipated surge in global fuel prices in the coming months following the decision last week by the group of 23 oil-exporting countries, commonly known as Opec+, to cut production.

This will most likely see the cost of goods and services rise as well, as manufacturers, transporters and farmers pass costs to the consumers.

While going back to the Uhuru-era subsidies would appear inconceivable, the new government might at some point have to consider a contingency plan to cushion consumers in one form or the other. One option available to it is to review the long list of taxes and levies that currently make up 40 percent of the retail price of fuel.

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Note: The results are not exact but very close to the actual.