State’s fuel subsidy faces further pressure as oil prices hit 7-year high
By John Otini, February 16, 2022The National Treasury’s fuel subsidy programme will come under extreme pressure in the next price review after international oil prices surged to a seven-year high on Russia-Ukraine tensions.
Oil prices rose from $82 dollars a barrel during the last shipment to $95 a barrel on concerns that a Russian attack on Ukraine could reduce oil supply due to sanctions from the United States. The high import prices will add pressure on the Petroleum Development Levy (PDL) kitty which is currently being used to compensate oil marketers.
PDL collected a total of Sh25 billion from oil consumers in the year ending June 2021 but most of the funds were diverted by Treasury to other ministries. As a result, oil marketers have been complaining of late payments of the fuel subsidy by the Treasury.
Kenya introduced the subsidy last year in April 2021 following a public outcry over high fuel prices and other basic needs such as bus fare.
In Monday’s review, the Energy and Petroleum Regulatory Authority (Epra) kept diesel prices at Sh110.6 a litre instead of Sh133.
“The applicable pump prices for this cycle have been maintained at the same level as in the immediate previous cycle,” Epra director-general Daniel Kiptoo said in the notice.
Cushion consumers
The government, he added, will utilise Petroleum Development Levy to cushion consumers from the otherwise high prices.
Murban crude oil index in UAE from where Kenya imports her oil consignment rose to $95 a barrel up from $82. This means that the government will have to pay more in subsidies in order to maintain the same price level.
Fuel prices will remain unchanged for the next one month thanks to a government subsidy.
Without the subsidy, super petrol would have hit a historic high of Sh144.47 a litre from the current Sh129.72, diesel Sh133.44 a litre from Sh110.6 and kerosene Sh123.77 from Sh103.54 a litre in what would have reignited public anger over high cost of living.