Kenya is facing a fuel crisis due to government subsidy delays.
Some petroleum marketers have been unable to buy new stocks due to cash flow issues. This week, the North Rift experienced an acute fuel shortage. Epra acknowledged the shortage but blamed supply issues without offering solutions.
“Unprecedented logistical constraints caused the shortage.” Due to these challenges, independent petroleum dealers have run out of petroleum stocks, “said Epra. “The country has enough fuel supplies, and there is no need to panic.”
Africa linked the fuel shortage to subsidy repayment delays totaling Sh13 billion. The state started the program last year, paying oil marketers for high margin cuts to keep recommended pump prices.
This month, the government partially applied the fuel subsidy, saving consumers Sh155.11 per litre. According to Epra, consumers would have paid Sh143.16 for diesel and Sh130.44 for kerosene if the state had not intervened.
Delays in subsidy payments force oil marketers to dip into cash reserves or take out loans to replenish fuel supplies. While the landed cost of the products continues to rise, oil marketing firms are left in a quandary.
Oil prices rose 13.34% to $676.4 (Sh77,717) per cubic meter in February, while diesel rose 11.74% to $677.31. (Sh77,822.44). The largest gain was 15.94% to $619.57. (Sh71,188.15).
On Wednesday, Petroleum Principal Secretary Andrew Kamau acknowledged a delay in subsidy payments, attributing it to continuous verification of each firm’s sales level.
“A month is lost. “This is because the proper firms are paid the correct amounts,” he told Nation. Africa.
But, according to Mr. Kamau, the world market’s high oil prices have made stocks expensive for certain enterprises.
“It’s not the subsidy. High import costs may present issues, depending on the marketer’s financial strength, the PS noted.
In response to the Russia-Ukraine crisis, global oil prices have risen, with marketers predicting higher costs in future pricing reviews, further complicating things for a state already grappling with its fuel subsidy plan.
Supply constraints and the potential of fresh Western sanctions against Russia drove up oil prices on Wednesday. According to CBK Governor Patrick Njoroge, the government would gradually wean Kenyans off gasoline subsidies.
Dr Njoroge said the government cannot keep up with current high gasoline prices and aims to adopt fiscal practices from other nations to reduce fuel costs and eliminate the subsidy.
“We anticipate the gasoline subsidy in Kenya to persist, but not at 100%. “There will be modifications that burden consumers,” CBK head stated following the Monetary Policy Committee meeting (MPC).
He said Kenya is researching how other countries cope with high gasoline costs. Countries have implemented many steps to shield consumers from the effects of spiraling global crude oil prices.
“It (the subsidy) can’t be long-term. We’ve seen how some nations become caught up in it and can’t get out. “We await advanced economies’ initiatives to cut prices,” Dr Njoroge stated.
“Prices at $100 a barrel are unfathomable. Their initiatives will help us remove the subsidies at the correct time.”
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