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Consumers spared price hike as fuel subsidies retained

BUSINESS
By Kamau Macharia | August 15th 2021

Fuel prices will remain unchanged for the next one month as the government retains subsidies on petroleum products.

This is despite higher crude oil prices as well as a weaker shilling, which resulted in the cost of importing petroleum products going up in July.

In the latest move to stabilise fuel prices, the National Treasury will pay oil marketing companies Sh7.1 per litre of super petrol, Sh9.89 per litre of diesel and Sh11.36 per litre of kerosene to retain prices at the same levels as July.

According to the monthly price capping guide published yesterday by the Energy and Petroleum Regulatory Authority (Epra), petrol will retail at Sh127.14 per litre in Nairobi, same as in July.

Diesel will sell at Sh107.66 per litre while kerosene was fixed at Sh97.85. 

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

Crude oil prices surged in July, during which the products that will be consumed over the August-September pricing cycle were procured

On average, crude oil traded at $66.7 (Sh7,203) per barrel in July compared to $63.35 (Sh6,842) in June.

The shilling also depreciated against the US dollar, trading at 108.26 in July compared to 107.82 in June.

This pushed up the landed cost of petroleum products, with kerosene going up by the highest margin of 9.81 per cent. 

“The average landed cost of imported super petrol increased 6.21 per cent, diesel increased by 7.36 per cent while kerosene increased by 9.81 per cent,” Epra said.

Landed cost, which is price of fuel before taxes and margins are added, stood at Sh60.46 per litre of petrol, Sh56.32 for diesel and Sh53.86 per litre of kerosene in July.

This is in comparison to Sh57.16 for petrol, Sh53.96 for diesel and Sh48.48 for kerosene the previous month.

The government has since March made attempts to cushion Kenyans from high fuel prices by cutting margins for oil marketing companies, who are then compensated by the National Treasury.

Diesel and kerosene have been subsidised for five months now, retailing at the same levels since March, with the government cushioning industries that use diesel for transport and production processes as well as many Kenyans who use kerosene for lighting and cooking.

Petrol users enjoyed the reprieve in April as well as in July. Prior to the subsidies, consumers paid Sh12.39 per litre of petrol as margin to the marketers but this has since gone down to Sh5.29 this month.

The margin for diesel and kerosene stood at Sh12.36 per litre but has been reduced to Sh2.47 per litre of diesel and Sh1 for kerosene. The government will pay the difference. 

It is not clear how much the government has been paying for the relief accorded to Kenyans through the subsidy measures but in April this year, a similar initiative by the State cost the taxpayer Sh1.4 billion, which was revealed in the Supplementary Budget tabled in Parliament in May. 

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