Concerns about new fuel prices with Ruto plans to end subsidy

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President William Ruto announced plans to end the fuel subsidy program, calling it unsustainable, a move that raised eyebrows among commodities consumers.

During his inaugural address on Tuesday, September 13, he noted that taxpayers had spent Ksh 144 billion, including Ksh 60 billion, on the grant program in the past four months alone.

He further argued that it had created an artificial shortage of the product and further burdened the national treasury.

“If the subsidy runs until the end of the fiscal year, it will cost the taxpayer Ksh 280 billion, equivalent to the entire development budget of the national government,” he stated.

President William Ruto reads his speech at Kasarani Stadium after being sworn in as Kenya’s fifth president on September 13, 2022

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However, the head of state did not disclose an intervention plan to protect TBEN from high fuel costs.

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The move raised concerns among consumers of the product ahead of the Energy Petroleum and Regulatory Authority (EPRA) price announcement on Wednesday, September 14.

As it stands, a liter of premium gasoline, diesel and kerosene goes for Ksh159.12, Ksh140.00 and Ksh127.94 respectively in Nairobi.

After his announcement, some gas stations began rationing the product and others faced shortages. There were long queues in some parts of the country, leading to panic buying ahead of the assessment.

The concern also follows a statement from Kenya Pipeline Corporation (KPC), which warned of a possible price hike due to the Treasury’s failure to transfer money owned by oil marketers.

KPC further attributed the impending price hike to marketers who were slow to pick the product at the Kipevu Oil Storage Facility and other storage areas, creating a shortage.

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In addition, EPRA had announced plans to revise KPC’s storage and pipeline rates, a move that would have a ripple effect on fuel prices.

According to the EPRA, the revision of the KPC levies would slightly increase fuel prices; prices will increase by Ksh0.54 per liter in Nairobi, Ksh0.42 per liter in Nakuru and Ksh0.29 per liter in Kisumu.

“The capacity of the pipeline does not directly affect the fuel as there are other dynamics, such as oil and gas, not only in Kenya but internationally. The tariff has nothing to do with supply and demand beyond the pump prices that we have”, according to KPC.

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Traffic jams on Uhuru Highway in Nairobi in March 2020.

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Given the factors at play, most TBEN are curious how Ruto will protect them from the high fuel supply after the subsidy program is withdrawn.

EPRA noted during the August review that the fuel subsidy program prevented gasoline prices from going Ksh214.04 per liter higher than Ksh159.12.

The cost of diesel would have increased to Ksh206.17 from Ksh140.03 and kerosene would have increased to Ksh202.11 from Ksh127.94.

In response to plans to end the fuel subsidy program, Narok Senator Ledama Ole Kina noted that fuel prices would rise after Ruto’s announcement.

“A painful reality from the 15th of the month, fuel prices will go high… the World Bank will push for subsidies to be abolished. Essentially, the tension is gone,” Ledama wrote.