Nairobi — The National Treasury now says fuel prices could increase further in the near future as the government seeks to gradually remove the subsidy cushioning Kenyans against high cost.
In a statement, Cabinet Secretary Ukur Yatani announced that A gradual adjustment in domestic fuel prices will be necessary "in domestic fuel prices will be necessary in order to progressively eliminate the need for the fuel subsidy possibly within the next financial year."
While blaming the move on crowded spending Yatani indicated that even if the prices do not increase, "they are not expected to revert to levels experienced prior to the Russia-Ukraine war."
The announcement came a day after Kenyans were spared, Sh49 and Sh25, and Sh42 more for a liter of Diesel, Super petrol, and Kerosene by a tax-funded subsidy implemented by the Government.
Despite a Sh9 increase in the prices of fuel, the Energy Petroleum and Regulatory Authority (EPRA), in its latest review noted that the three would have otherwise retailed at Sh189, Sh184 and Sh170 respectively.
The Government will utilize the Petroleum Development levy to cushion consumers from the surge in the global oil prices.
The average landed cost of imported super petrol increased by 5.96 percent, 10.90 percent while that of Kerosene decreased by 0.34 percent.
The Free Onboard ( FOB ) price of Murban crude oil lifted in May 2022 was posted at USD112.48 per barrel an increase of 19.67 per cent from USD 93.99 per barrel in April 2022.
Despite the utilisation of the fuel subsidy, World Bank has expressed concerns that the issuance of fuel subsidies to oil dealers is putting a strain on the Government's expenses and is subsequently hurting the country's budget and planning.
The fuel subsidy which was introduced in October 2021 through the petroleum development levy in order to cushion Kenyans from high fuel prices sees the Government spending approximately USD 66 million to subsidize the prices of diesel, super, and kerosene.
"The limited passthrough of higher international oil prices to consumers is generating fiscal costs, with the total monthly cost of subsidizing fuel estimated to be approximately USD66 million," World Bank said.
