The government has retained subsidies on diesel and kerosene to prevent a surge in the retail prices of the two products over the next month.
This is even as it continued to deny super petrol users a drop in retail prices and instead used the savings petrol consumers - mostly private motorists - would have got to cushion consumers of diesel.
The Energy and Petroleum Regulatory Authority (Epra) in the monthly fuel price capping guide retained the pump prices for the three products at the same levels.
It noted that super petrol would cross-subsidise diesel while the funds collected through the Petroleum Development Levy would be used to subsidise kerosene.
The price of super petrol would have otherwise reduced by more than Sh10.
This means super petrol will for the next month continue retailing at Sh177.3 per litre in Nairobi, diesel at Sh162 and kerosene at Sh145.94.
“In the period under review, the maximum allowed petroleum pump prices for super petrol, diesel and kerosene remained unchanged,” said Epra in a statement.
“The price of diesel has been cross-subsidised with that of super petrol, while a subsidy of Sh25.13 per litre has been maintained for kerosene to cushion consumers from the otherwise high prices. The government will utilise the Petroleum Development Levy (PDL) to compensate oil marketing companies for the difference in cost.”
Cost of living
The PDL is funded by motorists, who pay Sh5.40 per litre of diesel and super petrol whenever they fuel.
The retention of subsidies is a welcome move for consumers who are battling the high cost of living.
The National Treasury had in December 2022 said it would eliminate subsidies for diesel and kerosene, which would have seen a significant increase in the price of the two products.
In the Budget Review and Outlook Paper (Brop), Treasury noted that the government would eliminate the remaining unsustainable and consumption-driven fuel subsidy by the end of last December.
It added that it would, however, continue to subsidise fertiliser as it seeks to support agricultural production.
An increase in the cost of diesel, a critical fuel for sectors such as transportation, would have seen a hike in the cost of basic goods.
A hike in kerosene prices would have also hurt many low-income households who use the fuel for cooking and lighting.
Epra noted that the landed cost for the three products fell by between four and 11 per cent on account of a general decline in the cost of petroleum products globally.
The implementation of the subsidy programme has caused a mismatch between landed costs and actual pump prices. This is such that a reduction in landed costs might not mean a drop in retail prices.
“The average landed cost of imported super petrol decreased by 6.19 per cent… diesel decreased by 11.08 per cent… while kerosene decreased by 4.07 per cent,” said Epra.
The landed cost would have possibly dropped by a bigger margin were it not for the depreciation of the shilling.
“The mean monthly US dollar to Kenya shilling exchange rate depreciated by 3.53 per cent from Sh124.2 per US dollar in November 2022 to Sh128.58 per US dollar in December 2022,” said Epra.