Oil marketers in Kenya have started a push for higher fuel prices over parallel dollar rates. This follows the hike in pump prices for the June 14 to July 14 cycle that saw cost of one litre of petrol rise to Sh. 159 and a litre of diesel to Sh. 140.
The oil marketers say that they might be unable to operate in the absence of higher margin rates following the failure by the Central Bank of Kenya to tame the weakening shilling against the US dollar.
The marketers also say that the CBK has ailed to stop parallel dollar rates that have merged in the market following a dollar shortage that has gripped Kenya over the last few months.
The oil sector in Kenya is heavily reliant on foreign currency as Kenya currently imports all her oil products.
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This is not the first time the CBK is being accused of failing to stop parallel dollar rates. In May 2022, many importers reported that they could no longer access US dollars at the rate of Sh. 116 as had been cited by the CBK.
Apparently, local banks had set up a parallel exchange rate through which they were selling the US dollar at Sh. 120 and above. According to the Kenya Association of Manufacturers (KAM), importers are buying the dollar at more than Sh. 120 compared to the central bank’s official exchange rate of 116.81 units.
“Although the formally quoted exchange rate for the US dollar in the market is hovering around Sh. 115-116, none of our members can access currency at that price in the market. The real market price is now above Sh. 120,” KAM chairman Mucai Kunyiha said in May.
Currently, the US dollar is cited at Sh. 117.2 against the US dollar.
Kenyan motorists are now buying petrol at Sh.159.12 and diesel at Sh. 141 per litre. Kerosene will now sell at Sh. 127 per litre following an increase of Sh. 9 per litre from last review’s prices.
A litre of petrol last month sold at Sh. 150.12. Diesel sold at Sh. 131. Kerosene on the other hand sold at Sh. 118.94 per litre.
These new fuel prices will work under the petroleum subsidy the government has been running. Through the subsidy, the national treasury has been demanding that oil marketers sell their fuel at a loss. This loss is then supposed to be compensated by the government through the fuel subsidy.
However, the government has been failing to pay up on time, leaving oil marketers exposed to selling their fuel at a loss.