Relief as State retains fuel prices, cuts margins for oil companies

Fuel pumps at a petrol station in Nairobi [Elvis Ogina, Standard]

Kenyans have been handed a reprieve after the government retained fuel prices at the same levels as last month’s but slashed margins for oil marketing companies.

In yet another costly initiative for the State, consumers will be spared a hike of about Sh4 per litre of super petrol and Sh3 per litre of diesel this month, with the National Treasury expected to pick the tab in the coming weeks.

It is however not clear how much the government will pay for the relief though in April this year, a similar initiative by the State cost the taxpayer Sh1.4 billion.

In the new retail prices announced yesterday, the Energy and Petroleum Regulatory Authority (EPRA) retained the prices of super petrol at Sh127.14 per litre, diesel (Sh107.66) and kerosene (Sh97.85) in Nairobi.

This is despite the rising cost of crude oil, which has risen to $73 (Sh7,811) per barrel yesterday compared to an average of $63.35 (Sh6,778) in June.

“In the period under review, the price for super petrol, diesel and kerosene remain unchanged,” said Epra in a statement yesterday, adding that this was despite the higher cost of fuel imported into the country during the month.

“The super petrol at Sh127.14 per litre, diesel at Sh107.66 and kerosene at Sh97.85  in Nairobi. Diesel increased 3.69 per cent. In the period under review, no kerosene vessel was discharged at the Port of Mombasa,” noted Epra.

Oil marketers’ margins have been cut to Sh8.82 from Sh12.39 per litre of super petrol, a difference of Sh3.57 or 28 per cent lower.

Similarly, their margin for diesel has been reduced 36 per cent to Sh5.05 per litre from Sh8 in June. Since April this year, diesel margins have been cut by Sh7.31 or 60 per cent from Sh12.36 to the current level of Sh5.05.

The margin for kerosene has been retained at Sh6.04 per litre compared to june.

It is expected that the oil firms will not lose their money and that the government will refund what it has taken away in its attempt to cushion Kenyans from high fuel prices.

This was seen when the government first put in place the stabilisation policy in April, taking from the companies but later paying them.

Treasury would in the Supplementary Budget for the 2020/21 financial year tabled in Parliament in May reveal that it had paid out Sh1.4 billion.

The amount Treasury has so far paid out may have since gone up as it has been subsidising the cost of diesel and kerosene. Prices for the two products have remained unchanged since then and the marketers’ margins for the two products are yet to be fully restored.

Before the government started tampering with the formula in April this year, margins for diesel and kerosene stood at Sh12.36 per litre.

It is also not clear how the government is funding the pump price stabilisation initiative as it cannot draw from a kitty set up for this purpose owing to a lack of enabling legal framework.

Motorists currently pay Sh5.40 into the Petroleum Development Levy Fund - a fuel price stabilisation kitty.

The levy has been subjected to controversy, having been increased from 40 cents in July 2020 with the Petroleum Ministry saying it cannot tap the fund without enabling legislation.

The attempts to stabilise the cost of fuel over the last few months has however not cushioned Kenyans from the high cost of living.

The cost of fuel, particularly super petrol, remains high and only a few cents shy of the record high of Sh127.8 per litre seen in September 2018. This was when the government imposed a 16 per cent VAT on petroleum products but was later revised to eight per cent.