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Pain as petrol prices jump to historic high

BUSINESS
By Macharia Kamau | September 15th 2021

Pump attendant serves a vehicle at a fueling station in Kisumu on September 2, 2018.[Denish Ochieng, Standard]

Consumers have been hit hard after the retail prices of super petrol rose to a historical high, as the government dropped subsidies that had suppressed local pump prices.

This is expected to increase the cost of living by driving up the cost of electricity, water, transport, agricultural produce and manufactured goods

In the new prices released yesterday, super petrol will retail at Sh134.72 per litre in Nairobi, a six per cent increase from Sh127.14 per litre that had been in place until yesterday.

Diesel will retail at Sh115.6 over the next month, also a sharp increase from Sh107.66. Kerosene, largely a poor man’s fuel for lighting and cooking, has also gone up substantially, increasing by Sh12.97 per litre to Sh110.82.

The far-flung areas such as Elwal will see super petrol retail at Sh145.42 per litre.

“The maximum allowed petroleum prices in Nairobi for super petrol, diesel and kerosene increase by Sh7.58 per litre, Sh7.94 per litre and Sh12.97 per litre respectively,” said the Energy and Petroleum Regulatory Authority (Epra) yesterday when it published retail prices for the September-October pricing cycle.

The sharp rise is despite a reduction in international crude oil prices last month when the stocks that will be consumed over the next month were bought.

The new retail prices will be the highest ever recorded in Kenya.

Previously, pump prices had reached a high of Sh127.8 per litre of super petrol in Nairobi in September 2018, following the brief imposition of 16 per cent value-added tax (VAT).

The VAT rate was lowered to eight per cent two weeks later following a public outcry.

In the statement, Epra noted that there had been a reduction in the cost of refined petrol and diesel imported to Kenya, with kerosene being the only fuel that registered an increase, albeit marginal.

“The average landed cost of imported super petrol decreased by 0.72 per cent… diesel decreased 4.81 per cent… while kerosene increased by 0.96 per cent,” said the energy regulator.

Crude oil prices dropped last month when the stock of petroleum products that will be consumed this month was acquired.

The cost of Murban crude oil was at $74 (Sh7,800) at the beginning of the month, from a high of $76.9 (Sh8,300) at some point in July, the highest level it has hit this year.

It further dropped to $65.8 (Sh7 100) per barrel in mid-August before going up to $72 per barrel at the end of the month.

Epra director general Daniel Kiptoo explained that the increase in retail prices has been due to a price stabilisation mechanism that has been in place for some months. It has not been implemented this month.

The State has over the last few months subsidised the cost of fuel products and cushioned Kenyans from the sharp spike. In the subsidy scheme, oil marketing firms would forego their margins at the pump but would later be compensated by the government. “The stabilisation process for the pump prices has not been effected in this pricing cycle,” said Kiptoo.

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

Diesel and kerosene had been subsidised for six months, retailing at the same levels between March and August, 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 and later in July and August. In the stabilisation process, oil marketers’ margin for super petrol had been slashed to Sh5.29 as of last month but this has been restored to Sh12.39 per litre.

The margin for diesel and kerosene has also been restored to the pre-March 2021 level of Sh12.36 per litre up from Sh2.47 per litre for diesel and Sh1 for kerosene.

The government has been unclear on how it has been refunding the oil marketers, but in May this year, the National Treasury revealed in the Supplementary Budget for the 2020/21 financial year that it had paid Sh1.4 billion to the oil firms.

The cash was incurred in the initial month that the stabilisation measure was implemented.

Treasury, taking taxes to compensate the oil marketers comes even as the Petroleum Development Levy Fund, a kitty that partly has a fuel price stabilisation mandate, lies idle despite collecting billions from motorists.

The Petroleum Ministry has in the past cited a lack of enabling regulations to enable it to draw from the fund where motorists pay Sh5.40 per litre of diesel and petrol they consume.

Petrol users enjoyed the reprieve in April and later in July and August. In the stabilisation process, oil marketers’ margin for super petrol had been slashed to Sh5.29 as of last month but this has been restored to Sh12.39 per litre.

The margin for diesel and kerosene has also been restored to the pre-March 2021 level of Sh12.36 per litre up from Sh2.47 per litre for diesel and Sh1 for kerosene.

The government has been unclear on how it has been refunding the oil marketers, but in May this year, the National Treasury revealed in the Supplementary Budget for the 2020/21 financial year that it had paid Sh1.4 billion to the oil firms.

The cash was incurred in the initial month that the stabilisation measure was implemented.

Treasury, taking taxes to compensate the oil marketers comes even as the Petroleum Development Levy Fund, a kitty that partly has a fuel price stabilisation mandate, lies idle despite collecting billions from motorists.

The Petroleum Ministry has in the past cited a lack of enabling regulations to enable it to draw from the fund where motorists pay Sh5.40 per litre of diesel and petrol they consume.

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