Subsidy tames petrol prices from rising to a record Sh143 per litre

BUSINESS |

Fuel attendant Michael Kibuchi at Shell Kamakis service station.  [Jonah Onyango, Standard]

Fuel prices will remain unchanged for the next one month thanks to a government subsidy. This follows a spike in the cost of crude oil in the international markets.

Had the State failed to put in place a retail price stabilisation measure, super petrol would have retailed at a record high of Sh143.48 per litre in Nairobi, according to tabulations by the Energy and Petroleum Regulatory Authority (Epra).

Diesel, used by industries and the transport sector, would have hit Sh126.28 per litre in the capital over the November-December pricing cycle.

Kerosene – a fuel largely used by the poor to light and cook – would have reached Sh115.11 per litre.

Epra yesterday said the government tapped into the Petroleum Development Levy (PDL) kitty to stabilise pump prices. This will see the three petroleum products continue retailing at the same levels as was the case over the October-November pricing cycle.

Super petrol will retail Sh129.72 per litre, which means the price will be subsidised by Sh13.76. Diesel will continue selling at Sh110.60 with users being spared Sh15.68 increase, while kerosene will retail at Sh103.54 per litre, with households that rely on the fuel saving Sh11.57.

“In the period under review, the pump prices of super petrol, diesel and kerosene remain unchanged,” Epra said in a statement yesterday.

The regulator noted that this was despite an increase in the landed costs, which is the price of petroleum products when they get to Mombasa before taxes, levies and margins for oil marketing companies are loaded.

“The average landed cost of imported super petrol increase 8.66 per cent… diesel increased by 11.17 per cent… while kerosene increased by 9.27 per cent,” said Epra.

“Despite the increase in the landed costs, the applicable pump prices for this cycle have been maintained as the ones for the previous cycle. The State will utilise the PDL to cushion consumers from the otherwise high prices.”

The money from the fund will compensate oil marketing companies whose margins for super petrol and diesel have been reduced to zero and Sh1.65 for kerosene from Sh12 per litre.

The PDL has been a contentious levy for the past year and a half after the Petroleum ministry increased it to Sh5.40 per litre of diesel and petrol from 40 cents.

It added to the high taxation on fuel. Through the levy, Treasury had collected Sh25.9 billion in the year to June 2021.

There were however fears that the money may have been misallocated after Sh18.1 billion was transferred to the Infrastructure Department by Treasury and another Sh2.2 billion to the Energy ministry.

Only Sh1.6 billion was disbursed to the Petroleum ministry for stabilisation of pump prices. In all, Treasury had spent Sh6.6 billion in stabilising retail prices.

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