Kenyan petrol consumers to spend Sh5.3bn to cushion diesel buyers in three months
Petrol consumers will spend more than Sh5.3 billion by mid-February to subsidise diesel buyers as the government moves to stabilise fuel prices.
The Energy & Petroleum Regulatory Authority (Epra), in its latest review of maximum pump prices effective January 15 to February 14, denied super petrol consumers lower pump prices for the third consecutive time despite a fall in product costs to cushion diesel consumers from high prices.
The cross-subsidisation — where one product is priced higher and its proceedings are used to keep another product’s price lower — has kept diesel prices at Sh162 per litre while super petrol remains at Sh177.3 per litre.
“The price of diesel has been cross-subsidised with that of super to cushion consumers from otherwise prices,” said Epra in a statement.
The practice, which has been in place since November last year, means that for every litre of petrol purchased in the current schedule, a consumer pays an extra Sh11.49 that is used to subsidise diesel.
Taking into account value-added tax, petrol consumers are paying an extra Sh12.4 per litre to cushion their diesel counterparts.
On average, Kenyans consume about 179 million litres of petrol in a month, which translates to about Sh5.3 billion by February 14.
Petrol prices hit a record high of Sh179.3 per litre in September when the product or landed cost of petrol was recorded at Sh99.33 for the same quantity.
Pump prices have since gone down by a paltry Sh2 despite the product cost having fallen by Sh13 to Sh86.3 per litre. The fall in landed costs has not been felt by super petrol consumers due to the cross-subsidisation programme.
The landed cost of petrol is now at the lowest level since March last year and has been falling consecutively since September.
Estimates put the annual super petrol consumption in the country at 1.5 million tonnes.
Landed cost accounts for 48 percent of the current petrol pump price of Sh177.3 per litre down from a high of 81 percent in August last year.
Data from the Kenya National Bureau of Statistics show that the country consumes 2.3 million tonnes of diesel annually, accounting for 44 percent of total petroleum fuel consumed in Kenya.
Diesel directly powers various sectors of the economy such as agriculture in ploughing and transport services, power generation in the generation of thermal energy and other industrial processes.
However, road transport accounts for the largest portion of fuel consumption estimated at 76 percent.