Why Epra didn't increase December mid-month fuel prices

The fuel subsidy will see the prices of a litre of diesel and petrol retail at a maximum of Sh110.60 and Sh129.72 respectively in Nairobi.

Consumers have been spared from record-high fuel prices after the State opted to keep pump prices unchanged for the third month running and compensate oil marketers.

“Despite the increase in the landed costs, the applicable pump prices for this cycle have been maintained as the ones in the previous cycle. The government will use the Petroleum Development Levy to cushion consumers from the otherwise high prices,” said Epra Director General Daniel Kiptoo in the notice.

The Energy and Petroleum Regulatory Authority (Epra) pricing breakdown showed marketers will be fully compensated for their margins of Sh12.39 per litre of super petrol and Sh12.36 for diesel and kerosene.

The fuel subsidy will see the prices of a litre of diesel and petrol retail at a maximum of Sh110.60 and Sh129.72 respectively in Nairobi while that of kerosene will continue retailing at Sh103.54.

The subsidy has saved consumers from a Sh18.32 rise for a litre of petrol, Sh21.89 and Sh23.53 for the same quantity of diesel and kerosene respectively, which would have sent the prices of the three commodities to the highest level ever of Sh148.04 for petrol, Sh132.49 for diesel and Sh127.07 for kerosene.

The news offers a double boost for consumers given that President Uhuru Kenyatta on Sunday ordered a 15 per cent cut in electricity prices, promising a further 15 per cent cut by March next year.

The fuel subsidy has come to the rescue of consumers in an environment where the landed cost of the three commodities has spiked on increased price of Murban crude oil and the shilling depreciating by 1.11 per cent to 112.33 units to the dollar—a recipe for a price hike.

The landed cost of imported petrol rose by 3.59 per cent to $627.80 per cubic metre. The same quantity of diesel rose 6.98 per cent to $600.22 while that of kerosene increased by 15.78 per cent to $604.43.  

The fuel subsidy programme has come to the rescue of Kenyans in a year where fuel inflation averaged 12.42 per cent between January and November compared to 7.62 per cent that was posted in a similar period last year.

The fuel inflation rate has been in double digits for nine of those months, with the highest coming in March at 15.8 per cent. The lowest was in August at 9.2 per cent.

The rates for 2021 contrast with last year where the highest inflation rate stayed in single digits for seven months to July before peaking at 12.1 per cent in October 2020.

Kenya introduced the subsidy programme to cushion consumers from steep fuel prices. The scheme is funded by money raised from fuel consumers through the Petroleum Development Levy, which was increased to Sh5.40 a litre in July last year from Sh0.40.

The State in April started offering consumers of diesel and kerosene a subsidy, with those using petrol enjoying the benefit with the exception of the May review.

But fuel prices in September rose to the highest level in Kenya’s history after the State paused the subsidy of Sh7.10 on petrol, Sh9.90 on diesel and Sh11.36 on kerosene leading to public outrage.

The National Treasury revealed then that it had exhausted the Sh31 billion set aside to subsidise fuel after it diverted Sh18.1 billion to support Standard Gauge Railway operations.

Epra in October reinstated the fuel subsidy after public outcry, cutting monthly pump prices that were maintained in last month’s review.

Expensive fuel usually unleashes pricing pressure across the economy, with ramifications on the cost of living measure.

For instance, the record high prices for September had seen inflation hit 19-month high of 6.9 per cent that was also driven by increases in food and electricity prices.

Producers of services such as electricity and manufactured goods usually factor in their pricing. The economy also uses diesel for transportation, power generation and running of agricultural machinery such as tractors, with a direct impact on the cost of farm produce.?