- Yesterday, the international benchmark, Brent crude, spiked 8.54 per cent higher to $128.2 (Sh14,592).
- The government has indicated that the plan is not unsustainable
Image: FILE
Kenya's fuel subsidy that has cushioned consumers from rising global oil prices could end soon.
This could see a litre of petrol jump to a high of Sh150 from the current Sh129.72
Yesterday, Oil Marketing Companies (OMCs) deliberated on the way forward after the government indicated it would be difficult to sustain the subsidy as global prices skyrocket due to the Russia/Ukraine crisis.
Last month, Petroleum Principal Secretary Andrew Kamau told MPs that the global rally in crude prices has piled pressure on the fund which is fast being depleted.
''The government is struggling to pay oil marketers for the high cuts on their margins to keep pump prices unchanged, making future the fuel subsidy scheme uncertain,'' Kamau told the National Assembly Committee on Energy.
During a three hour closed door meeting held at a Nairobi hotel on Tuesday, marketers agreed to hold fresh negotiations with the government.
"Oil business is a game of margins. Any slight mistake and you reap losses. We have been failed before, we cannot afford another lip service from the government," a managing director at one of the leading oil marketing firms in the county told the Star.
He expressed fears that the government may not manage to raise Sh10 billion needed this month and Sh15 billion for the coming month.
''We are meant to understand that the money supporting the subsidy plan has been exhausted but our hands are tied,'' he said.
Marketers however said they are willing to continue with the plan if the government presents them with a clear refund plan.
The government has been implementing the stabilisation programme since April last year following a surge in global crude oil prices following increased demand.
In its February fuel price review, the Energy and Petroleum Regulatory Authority saved motorists from paying Sh23.29 more on a litre of diesel due to the State subsidy that has kept pump prices unchanged for the fourth month in a row.
EPRA retained the price of diesel at Sh110.60 a litre in Nairobi despite a jump in the shipping costs.
Without the subsidy, consumers would have paid Sh133.89 for a litre of diesel, Sh144.25 for a litre of petrol and Sh119.42 for kerosene.
The subsidy scheme is supported by billions of shillings raised from fuel consumers through the Petroleum Development Levy, which was increased to Sh5.40 a litre in July last year from Sh0.40, representing a 1,250 per cent rise.
It had in September stopped the subsidy, which saw fuel prices jump to a historical high of Sh134.72 per litre of Super petrol and Sh115.60 for a litre of diesel.
The initiative was halted after consistent delays in refunds at the National Treasury diverted billions of shillings meant to compensate the dealers to other budgetary allocations.
The National Treasury PS Julius Muia told the National Assembly in September that the exchequer disbursedSh18.1 billion to the Ministry of Transport and Infrastructure to defray the Standard Gauge Railway costs.
Data from the Energy and Petroleum Regulatory Authority show that Kenya uses 165.45 million litres of super petrol every month, 220.57 million litres for diesel and 11.26 million litres for kerosene.
Yesterday, the international benchmark, Brent crude, spiked 8.54 per cent higher to $128.2 (Sh14,592). It hit a high of $139.13 (Sh15,846) at one point overnight, also its highest since July 2008.
''This could see consumers buy a litre of petrol at over Sh150 in coming days minus the subsidy,'' Energy expert Ronnie Bosire told the Star.