Motorists are likely to buy a litre of petrol at a high of Sh215 from September 14 if the fuel subsidy is finally scrapped.
Also compounding the situation and which might see oil companies say no to any further subsidy is the high debt owed to to them.
This is expected to be the first headache for President William Ruto who will be sworn in on Tuesday.
According to economic analyst Jerry Mugera, stabilising fuel prices will be Ruto’s first major assignment considering a spike will have a huge spiral effect on inflation which hit 8.5 per cent in a recent monthly review.
”Voters will be expecting a miracle from Ruto. I bet he is alive to this fact,” Mugera said.
In the third review of the International Monitory Fund IMF)$2.34 billion loan, Kenya committed to end the fuel subsidy before October. The subsidy has been used to cushion consumers from high global prices.
The international lender is against the initiative that has cut retail fuel prices by over Sh20 per litre for almost a year now.
The Energy and Petroleum Authority of Kenya (EPRA) retained fuel prices in the last review as the government utilised the Petroleum Development Levy (PDL) to cushion consumers.
Until September 14, a litre of Petrol will retail at Sh159.12, Kerosene at Sh127.9 4 and diesel at Sh140
Without the subsidy, prices in the last review would have increased to Sh214.13 for diesel, Sh206.17 for petrol and Sh 202.11 for Kerosene.
Yesterday, Petroleum permanent secretary Andrew Kamau told the Star that the government will address the situation in due cause.
”We will advise in due course,” Kamau said, responding to our queries on how the government is planning to stabilise fuel prices when the subsidy plan ends.
We also sought to know the fate of oil marketing firms that are owed over Sh140 billion.
Last week, the government started negotiations with oil marketers to address the refund arrears and dollar shortage to strike a settlement on price stability as a way of curbing rising inflation.
However, a senior manager at one of the oil marketing firms yesterday told the Star in confidence that talks abruptly ended after the apex’s court ruling on the presidential election petition Monday this week.
He however failed to give oil marketers’ next plan of action if they are not paid. They had earlier threatened to cut supply.
Last week, journalists were kicked out of the quarter sector briefing session organised by The Petroleum Institute of East Africa(PIEA) after the Central Bank governor stepped in.
A source at the meeting said the talks centered around resolving the rising cost of living in the country, dollar shortage and life after the end of the fuel subsidy plan.
Oil marketers were yet to receive any word from the National Treasury on Sh47.5 billion debt by the time of going to press.
”The arrears are for the June-July, July-August and August -September monthly reviews. This has really worsened our cash flow. The subsidy plan does not make sense,” the dealer told the Star.
The government has been spending an average of Sh7.65 billion every month to subsidise fuel and contain public outrage over the high cost of living, highlighting the adverse impact of the subsidy on the country’s revenues.
This is not the first time the government is wrong books with oil dealers.
Marketers hoarded fuel in April to protest delayed compensation leading to a nationwide shortage that threatened to cripple the economy.
This saw pump prices hit a high of Sh200 a litre, causing a nationwide uproar.
In September last year, Kenya witnessed some of the highest fuel prices after OMCs who had not been compensated walked out of the government’s deal, protesting delayed disbursement of the kitty.
The National Treasury had diverted Sh18.1 billion meant for the stabilisation of fuel prices to fund energy and infrastructure projects.
Kenya introduced the kitty in the wake of the Covid-19 crisis in 2020 which disrupted the global supply chain. This saw fuel prices rise, with the spiral effect spilling to other sectors, pushing up the cost of living.
To cushion families, the government raised the petrol levy to Sh5.40 from Sh0.40 in July 2020 and committed to adding about Sh2 billion every month to the kitty to cushion consumers from price hikes.
By The Star