SIGH OF RELIEF

Uhuru bows to pressure, stops fuel price rise

Energy and Petroleum Regulatory Authority says the government will compensate oil marketers.

In Summary
  • A litre of petrol will continue retailing for Sh122.81 in Nairobi for the next one month.
  • Economists had warned of tougher living conditions.
Fuel prices reviewed.
Fuel prices reviewed.
Image: FILE

A last minute intervention by the National Treasury after public uproar on expected fuel prices increase forced the energy agency to retain pump prices. 

A letter from the Exchequer seen by the Star addressed to acting Energy and Petroleum Regulatory Authority director Daniel Kiptoo indicated that the government will compensate oil marketers. 

"The purpose of this letter is therefore to authorise EPRA to publish fuel prices for the period March 15 to April 14 to apply for the period April 15 to May 14," the letter reads in part. 

On Wednesday, local dailies including the Star warned of an impending fuel price increase, leading to public uproar.

"Prices of super petrol, diesel and kerosene to remain unchanged for the next one month up to May 14 when next review is due," EPRA said without giving a reason for retaining retail prices.

A litre of petrol will continue trading at Sh122.81 in Nairobi, diesel Sh107.66 and a litre of Kerosene to retail at Sh97.85 for the one month to May 14.

This, despite the landed cost of petrol increasing 9.27 per cent to $4491.50 per cubic metre compared to $449.82 in February. A cubic metre of diesel and kerosene also rose by 4.77 and 7.29 per cent respectively.

Economists had warned of tougher living conditions for households in the country already pressed by the vagaries of Covid-19 should President Uhuru Kenyatta’s regime add a dime on already skyrocketing fuel prices.

The latest report on effects of Covid-19 by the Consortium of Research on Governance reveals that 74 per cent of families in the country are currently struggling to afford basic needs.

Although there are other factors that influence the cost of living including availability of rainfall for agriculture and cost of credit, a jump in fuel prices has a spiral effect on cost of power, transport and overall production.

According to the Economic Research Institute, the cost of fuel accounts for 40 per cent of the overall Consumer Price Index.

The cost of fuel has been rising for the past three months, with a litre of super petrol, diesel, and kerosene increasing by Sh8.19 per litre, Sh5.51 per litre, and Sh5.32 per litre, respectively in February. 

In January, the prices of Super petrol, diesel and kerosene increased by Sh0.17, Sh4.57 and Sh3.56 per litre respectively. 

Higher crude oil prices in March and April are primarily a result of lower crude oil production from members of the Organization of the Petroleum Exporting Countries and partner countries, as announced at their March 4 meeting.

In February 2021, OPEC+ production cuts combined with supply disruptions in the United States contributed to monthly global petroleum inventory withdrawals estimated at 3.7 million barrels per day, the largest monthly withdrawal since December 2002. 

In the last reading ending midnight, Super petrol prices rose by Sh7.63 to retail at Sh122.81 per litre. The hike in pump prices also affected diesel and kerosene, whose prices leapt by Sh5.75 and Sh5.41 per litre respectively.

Although EPRA was quick to blame the hike on surging international prices, a closer look at fuel cost tabulation indicates that taxes make up to over 50 per cent of retail fuel prices.

According to EPRA's fuel cost calculator, consumers in Kenya pay at least nine different taxes and levies on fuel, the highest in East Africa region. 

In the prevailing review, total taxes and levies on a litre of petrol amount to Sh57.33, which is Sh7.49 more than the cost of the product when it arrived at the port, meaning consumers are paying more taxes than the actual cost of the fuel. 

A litre of diesel in Kampala is selling at USh3,700 (Sh110.71), slightly above pump prices in Eldoret currently at Sh108.40, despite Uganda importing the bulk of its products through Mombasa.

In Tanzania, motorists are paying an average of Tsh1,981 (Sh93.63) for a litre of petrol as consumers enjoy economies of scale on imports through the Port of Dar es Salaam.

President Kenyatta's regime first introduced Value Added Tax on petrol, diesel, kerosene and jet fuel in the VAT Act of 2013, with a three-year grace period that would have seen it come into force in 2016.

This was after the International Monitory piled pressure on Kenya to increase its domestic revenue mobilization to avoid dependence on international debt to fix the budget deficit, and perhaps as an assurance that it can meet its debt obligation.

Although Parliament passed the Bill into law, setting the stage for a 16 per cent VAT on fuel, the public uproar saw MPs retreat, slashing it to eight per cent. 

The VAT component accounts for Sh9.10 on a litre of  petrol, Sh7.97 for diesel and Sh7.25 for kerosene.

Edited by Henry Makori