Hike in fuel prices to persist in coming months, Chirchir warns

Energy Cabinet Secretary Davis Chirchir addresses press conference on the recent KPLC blackouts that left the country in darkness. [Samson Wire, Standard]

Fuel prices are likely to continue to rise in the coming months, with officials in the Energy sector offering few answers on when Kenyans can expect a respite.

A parliamentary committee yesterday heard that the trajectory offers little hope, a situation the Energy Cabinet Secretary Davis Chirchir said the government had no control over.

The CS, who termed the increase “unprecedented”, evaded questions by members of the National Assembly Energy Committee on when Kenyans would see lower pump prices, stating that his ministry could soon manage the rise.

“We should be able to manage the rising cost of fuel within the next three or four months, or reduce it so that it doesn’t rise by the figure we saw yesterday (Thursday),” Chirchir said in response to the latest hike, the highest in recent times, which saw the price of a litre of petrol shoot beyond the Sh200 mark for the first time ever.

The new price marked a Sh16.96 increase. The cost of kerosene rose to Sh202 with a Sh33 hike.

“What you have done through that humongous rise is that you have laid off so many people. Many will lose their jobs across all sectors,” said Embakasi South MP Julius Mawathe.

Energy and Petroleum Regulatory Authority (EPRA) Director General Daniel Kiptoo said that the sharp increase was caused by global factors beyond the government’s control, such as cuts in petroleum production, the Russia-Ukraine conflict, and increased demand, owing to the onset of winter, as well as the weakening of the shilling against the dollar.

“On average, we import about 550 million litres and about 60 to 65 per cent of that is what we consume locally. The movement of one shilling to the dollar is an additional Sh300m to Sh350m that we pass on to the consumer at the pump,” said Kiptoo.

The EPRA boss said that about Sh8.7 billion worth of stabilisation funds from the petroleum development levy was needed to keep the new prices constant.  

“If we look at the trend, we already know the trajectory of where we are going next month,” said Kiptoo, signalling the inevitability of a hike.

Chirchir stated that the stabilisation fund’s coffers were empty owing to payments worth Sh24 billion to oil marketers contracted during last year’s fuel subsidy. 

“Treasury used the future earnings of the stabilisation fund to pay off the balance,” the CS said, adding that the fund raises Sh2.5 billion monthly.

The CS had said that his ministry would reach out to the National Treasury to have the stabilisation fund utilised in keeping fuel costs down, in addition to a freight and premium discount on petroleum products he said his ministry negotiated.

MPs suggested the implementation of subsidies to cushion Kenyans from the worsening situation and proposed law changes that would prevent EPRA from ambushing Kenyans with new fuel prices terming the body a “one-man show”.

Chirchir was also hard-pressed to defend the Government-to-Government (G-to-G) fuel deal entered in March, amid claims that it had not achieved its objectives.

“The G-to-G is a fraud. When you met us, you said the dollar exchange rate would be Sh120. You are denying Kenyans the opportunity to do business and yet we don’t see its benefits,” said Nyatike MP Tom Odege.

“The G-to-G was not aimed at reducing pump prices but easing the demand on the dollar. It has helped us make the dollar available,” Chirchir responded. “The arrangement has eased pressure on the Kenyan shilling with a reduction in depreciation against the US dollar from a high of 3 per cent per month to 1 per cent.

Chirchir also responded to last month’s national power outage, stating that no one could be faulted for the same.