Kenya will pay fuel subsidies to offset shortage fears

Kenya plans to pay subsidy arrears to fuel sellers amid shortages at the pumps. Like many developing economies, Kenya has been reeling with rapidly rising fuel prices, accelerated by the conflict in Ukraine.

Motorists in Kenya endured another day of fuel shortages as Kenyan President Uhuru Kenyatta signed a supplementary budget for the fiscal year which allocated an additional 35 billion shillings (roughly €250 million) for the country's fuel subsidy program, his office said.

While the Kenyan government blamed panic buying and hoarding, it said it would pay fuel subsidies to retailers this week to offset fears that shortages are on the horizon.

How bad are Kenya's fuel shortages?

The government announcement comes after several days of lengthy queues at filling stations, often with limits on how much fuel people can buy, if any is left at all. One motorist in the capital Nairobi told Reuters she had to go to several petrol stations and was considering taking her company's fleet of vehicles off the road as a result.

Evelyn Njenga, whose family operates a fleet of commercial pick-up trucks, said, "We will start parking the cars at home."

What does the Kenyan government say?

The principal secretary in the petroleum and mining ministry Andrew Kamau said the latest price spikes were causing cash flow difficulties for smaller fuel traders. Delays in the payments of subsidies, introduced late last year in response to rapidly rising global fuel prices, has also added to concerns.

Kamau said the Kenyan government owes 36 billion shillings in subsidies. The Energy and Petroleum Regulatory Authority (EPRA) said that the government was working to settle its debts.

The government has blamed hoarders, insisting it had enough petrol in reserve to supply the entire country of almost 50 million. Kenya Pipeline Company said that state depots contained more than 69 million liters (18 million gallons) of petrol and 94 million liters (25 million gallons) of diesel.

Government data has concluded Kenyan consumers use nearly 400 million liters of petrol and diesel every month. Kenya is reeling from a surge in crude oil prices since late last year, forcing the country to subsidize retail prices. The conflict in Ukraine has accelerated this pre-existing problem.

East Africa's largest economy unveiled a fuel subsidy last April to help customers after international oil markets were roiled by instability. Kenya's central bank governor Patrick Njoroge said, "Prices at $100 a barrel are completely beyond the realm of understanding."