Fuel prices hit historic high as government ends subsidies

The new fuel prices are a historic high in Kenya. [File, Standard]

Fuel prices in Kenya have reached an all-time high after the government scrapped the fuel subsidy program that gave motorists relief last year.

In Nairobi, a liter of petrol costs Sh179.30, while a liter of diesel costs Sh165.00.

A liter of kerosene will sell for Sh147.94 from Thursday September 15th.

The new prices apply for the next month.

This is the first time the government has withdrawn the aid program which has cost more than Sh100 billion.

In his inaugural address on Tuesday, September 13, President William Ruto said the fuel relief program was being scrapped because it was seriously dampening Kenya’s economic recovery.

Last month the government said it would pour more money into the fuel subsidy.

The state said the move would save consumers from spending more than Sh200 a liter on the three petroleum products.

The Energy and Petroleum Regulatory Authority (EPRA) said in its August-September price cap that pump prices for premium gasoline, diesel and kerosene would remain at the same level as in July 2022.

EPRA said it has been forced to further stretch its finances by increasing its spending on the subsidy.

“Prices in effect for this cycle have been kept as they were in the immediately preceding cycle. The government will use the Petroleum Development Levy to cushion consumers from otherwise higher prices,” EPRA said in a statement.

Earlier, disclosures by the Ministry of Petroleum showed that spending on the subsidy had exceeded Sh15 billion for several months.

The industry regulator said crude oil prices had risen around the world. Locally, the shilling continued its losing streak and weakened further against the US dollar in July and August.

This in turn led to an increase in the average cost of landing, which is the cost of fuel when landing in Kenya before costs such as taxes, land transport and marketers’ margins.

Since April 2021, the state has been subsidizing drivers from the high fuel costs.

It had spent more than Sh100 billion on a scheme in which it paid oil marketers to stabilize pump prices.

In July, the state approved the use of an additional Sh16.68 billion for fuel subsidies.

The fuel subsidy had enabled Kenyans to save more than Sh100 billion that they would have spent on the raw material.

The International Monetary Fund (IMF) had pushed for its abolition. In a July report, the institution said the National Treasury had agreed to scrap the program and would slowly withdraw, allowing local prices to reflect market realities such as high crude oil costs and the weak shilling.

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