The government’s decision to reduce the subsidy applied on fuel denied consumers a fall in pump prices, even as shipment costs of the commodity dropped.
A litre of petrol and diesel will remain unchanged at Sh174.63 and Sh164.86 respectively and Sh148.99 for a litre of kerosene, according to the schedule gazetted by Energy and Petroleum Regulatory Authority (Epra) on Wednesday.
The energy regulator applied a subsidy Sh0.28 and Sh2.20 per litre of diesel and petrol respectively in the pricing cycle that will end on June 14, compared to the previous subsidy of Sh6.09 and Sh4.66 per litre of diesel and petrol respectively.
Shipment costs of diesel fell 6.62 percent to $594.60 (Sh77,167.18) per cubic metre last month, from $636.75 (Sh82,561) in March while those of petrol fell by 2.95 percent to $588.16 (Sh76,331.40) per cubic metre from $606.06 (Sh78,581.73) for same quantity.
“In the period under review, maximum allowed petroleum pump prices for super petrol, diesel and kerosene remain unchanged,” Epra Director General, Daniel Kiptoo said in the Gazette Notice on Wednesday.
The drops in shipment costs were expected to trigger price cuts in the new monthly cycle ending June 14.
A fall in fuel prices would have had a trickle-down impact on the economy and help ease inflation, given that the Kenyan economy is largely diesel-driven.
The decision to keep pump prices unchanged will hit the government's efforts of ensuring a fall in inflation— a measure of the cost of living. Inflation rose to 4.1 percent last month from 3.6 percent in March, driven by an increase in the prices of electricity, gas and food.
Service providers and manufactures of goods, electricity generators and farmers factor the cost of fuel in pricing of their goods and services, underscoring why fuel prices are key in determining inflation.
The 4.1 percent inflation rate is the highest in eight months even as respondents in a survey by the Central Bank of Kenya remained bullish, that they expect inflation to drop in the coming months on anticipation that energy and food prices will fall.
Landed costs (a combination of cost of buying fuel and freight) are the biggest determinants of pump prices, underscoring why a drop in these costs is expected to trigger price drops.
The fall in landed costs also allowed Epra to reduce the subsidy that the government has been using to lower pump prices and avert public outrage over costly fuel and inflation.
Kenya currently imports fuel under a government-backed deal where three Gulf oil majors supply the country with fuel on a 180-day credit period.
The Gulf oil majors-Saudi Aramco, Emirates National Oil Company and the Abu Dhabi National Oil Company recently agreed to lower the premiums at which they sell fuel to Kenya in a bid to ensure that consumers do not miss out on the falling prices of fuel globally.
