Kenya’s fuel crisis worsens ahead of price changes.
The petrol scarcity has returned to haunt motorists as concerns over the State-backed subsidies continue ahead of the monthly review of pump pricing.
Outside of Nairobi, stores began to run out of stock over the weekend, and scarcity was noticed in the capital on Monday.
Oil merchants blamed the shortages on a lack of understanding over the gasoline subsidy, which the state instituted last April to stabilize prices amid fears of stockpiling.
Delays in the government’s delivery of subsidies to firms have driven up prices in the wholesale sector, where oil majors resell gasoline to smaller independent fuel merchants, who control 40% of the market.
As a result, local shops have been hesitant to purchase the costlier gasoline, with increasing supply from oil giants unable to fill the gap.
The oil companies have also been hesitant to raise supply because they are unsure if the State would reimburse them for gasoline that was not used to calculate the monthly price changes, which go into effect on April 15 and will last for one month.
The state eliminated a portion of the fuel subsidy in March, driving diesel and gasoline prices to an all-time high, the first rise since October.
“Due to the subsidies, there is rising reluctance to sell all of your equities on the market.”
What if the government chooses to keep pricing the same, but the stocks you’re selling were delivered at a greater cost? “We’re talking about massive losses,” said the CEO of a major oil marketer, who requested anonymity for fear of retaliation from the government.
“The wholesale market is also dry since the independents are not purchasing expensive gasoline, despite the fact that their share is substantial.” If the government does not address the core source of the issue, the shortages will persist.”
To alleviate their financial pressure, the marketers are believed to have raised their proportion of petroleum sold to neighboring nations Uganda, Rwanda, and DR Congo to more than 60% of total imports from 40% before.
This has further reduced supplies as neighboring nations return to routine.
“Kenya Pipeline claims ample supplies, but does not specify how much of this is for Kenya.” Marketers have skewed ratios in favor of the regional market, and it’s all because of subsidy anxieties,” claimed another oil executive who did not want to be named.
The government claims it owes the firm Ksh13 billion ($112 million) and on April 4 issued Ksh8.2 billion ($70.7 million) to dealers who believe they are due more than Ksh20 billion ($172 million).
The payment temporarily alleviated the shortfall, despite promises from the state that there would be ample petroleum supplies.
On Monday, practically all of the filling stations along the Kisumu-Nairobi route were closed, and the handful that were open in the capital had enormous lines of automobiles waiting to fill up.
Several bus companies and freight carriers have stopped their fleets due to a shortage of gasoline, leaving hundreds of city residents stranded.
Private motorists are also having difficulty obtaining the rare commodity, resulting in panic purchasing, which caused merchants to raise rates and others to restrict the quantity of petrol supplied per driver.
In certain filling stations, a liter of petrol costs more than Sh200, exceeding the amount set by the Energy and Petroleum Regulatory Authority (Ezra) in its most recent monthly fuel assessment.
After the partial subsidy removal, diesel and petrol prices in Nairobi are limited at Ksh115.60 ($1) and Ksh134.72 ($1.16) for the month of April 15—the highest level in Kenya’s history.
The steep increase in gasoline costs in the aftermath of the Russia-Ukraine conflict has caused a boom in commodities such as crude oil, thus crippling the subsidy system.
The weakening subsidy scheme prompted Kenya’s energy regulator to raise diesel and petrol prices by Ksh5 ($0.043) per liter, to Ksh115.60 ($1) and Ksh134.72 ($1.16), respectively – the highest amount in the country’s history — in its most recent monthly review.
Without the subsidies, a liter of super would have cost Ksh155.11 ($1.34), while a liter of diesel would have cost Ksh143.16 ($1.23).
Apart from hurting the government’s budget, rising oil prices increased inflation by half a percentage point last month, frustrating officials.