Station workers empty fuel from a tank truck in the town of Kakamega on April 25, 2022. [Mumo Munuve, Standard]

Kenyans are expected to prepare for a higher cost of commodities after a Sh5.50 hike in the retail price of fuel.

The hike took effect despite the government maintaining the fuel subsidy it used to protect motorists from the rising cost of crude oil in the face of a weak shilling.

The Energy and Petroleum Regulatory Authority (Epra) yesterday raised the prices at the pump of the three main petroleum products, the price of which is regulated.

The Authority cited higher crude oil costs during the month of April and early May when inventories that will be consumed during the May-June price cycle were acquired.

After the hike, super petrol will now sell for Sh150.12 per liter in Nairobi over the next month from Sh144.62, while diesel will sell for Sh131 per liter in the city from Sh125.50 .

Diesel is heavily used in the transport and manufacturing industries, and the increase is expected to be felt by Kenyans, as industries will be forced to increase the cost of raw materials to reflect the increase.

The kerosene will retail at 118.94 shillings per liter in Nairobi, down from 113.44 shillings.

“The average landed cost of imported premium gasoline increased by 1.46%…diesel increased by 6.49%…while kerosene increased by 31.13%,” Epra said in a statement announcing the price cap guide for the May-June cycle.

He also noted that the prices would have been higher, but the government applied a subsidy.

Kerosene, which is mainly used by the poor for lighting and cooking, was subsidized by the highest margin of 50 shillings per litre, without which prices at the pump would have jumped to 169.26 shillings per litre.

The diesel was subsidized at 43.94 shillings and in the absence of the subsidy it would have retailed at 174.94 shillings. The super petrol was subsidized by Sh26.35 and kept it from reaching Sh176.47.

The new prices come amid supply shocks experienced in April that were related to the subsidy.

Last month, the country experienced major shortages that were partly attributed to a protest by major oil marketing companies who had demanded a delay in payment of their margins by the government.

Oil traders are said to have withheld produce from the Kenyan market while diverting fuel to neighboring countries in a bid to coerce the government into speeding up their payments.

When determining retail prices, Epra normally reduces the margins that would accrue to oil companies in order to keep prices at the pump low.

Companies are then compensated later by the government, a process they say takes too long and robs them of cash for their operations.

This has been the norm since April last year when the government began to shield Kenyans from the high cost of fuel.

The Petroleum Ministry, in a report to parliament in April, said the state had spent 49.2 billion shillings – paid to oil distributors – to keep fuel prices in the country within a reasonable margin.

The money comes from the Petroleum Development Levy (PDL) Fund, a kitty financed by motorists who pay 5.40 shillings per liter of premium petrol or diesel they consume.

The ministry has in the past said the grant is unsustainable, noting that although it collects about 2 billion shillings a month, it spends about 8 billion shillings.

This is particularly the case over the past two months, when global oil prices have soared on rising demand as economies shed the impact of Covid-19 and the most recent Russian invasion of the ‘Ukraine.

According to data from Epra, oil prices climbed to $93.99 (Sh10,808) a barrel in April from $85.11 (Sh9,787) a barrel in March.

This has been the trend over the past year, when oil prices have risen due to increased global demand. In June last year, a barrel of crude oil was selling for $63.35 (Sh7,285).

The shilling also weakened against the US dollar, trading at 115.74 shillings to the dollar in April from 114.60 shillings in March.

A low shilling means oil companies have to use more shillings to import the same amount of fuel.

Monitor water pumps remotely via your phone

Motor vehicle tracking and monitoring is not new to Kenyans. The competition to install affordable tracking devices is fierce but essential for fleet managers who receive reports online and track vehicles from the comfort of their office.