Is Kenya’s fuel subsidy back?
Key questions this article answers:
- The Kenyan energy regulator decided to freeze fuel prices for another month. What drove this decision?
- The fuel stabilisation fund was designed to cover the difference between the regulated and actual fuel costs. Is this a return to Kenya’s fuel subsidy regime?
Commodity markets, especially energy commodity markets, are known to be volatile. Prices react quickly to fundamental and perceived shifts, leaving consumers struggling to keep up.
John Maynard Keynes called this volatility “one of the greatest evils in international trade”. The Kenyan government is familiar with the truth behind this quote, as keeping fuel prices stable has become an impossibly difficult task.
Following the implementation of the 16% VAT on retail fuel prices on the 15th of July, petrol prices in Nairobi went from 182.04 KES ($1.27) to 194.68 KES ($1.35). Kenya’s Energy and Petroleum Regulatory Authority (EPRA) releases fuel prices once a month, and price updates were to be announced on the 14th of August. But now, it seems like the fuel subsidy has been reinstated.
The chart below shows the trajectory of petrol prices in Nairobi over the past year.
On the 14th of August, we expected higher fuel
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