(Bloomberg) -- Kenya agreed to compensate oil marketers for selling fuel they imported at rates higher than what's reflected in the retail cap, a bid to end a supply shortage in the country.
Retailers will now be subsidized to sell gasoline and diesel from cargoes that arrived after the March 15 monthly pricing window, Energy and Petroleum Regulatory Authority's director-general, Daniel Kiptoo, said by phone on Wednesday. The price of oil has sky-rocketed in part due to the war in Ukraine.
This means the current retail prices won't change until the next review.
While the government said there are adequate stocks of petroleum products in the country, there has been a shortage at filling stations with queues persisting into the second week. The energy ministry earlier said the government delayed payment of subsidies to companies which disrupted deliveries to stations, resulting in panic buying and a spike in demand.
The revelation on new cargo shows the issue relates to concerns of oil marketers possibly selling at a loss amid high international prices. The new compensation deal comes after President Uhuru Kenyatta signed a supplementary budget that included 34.4 billion shillings ($297 million) for fuel subsidies.
Fuel Shortages in Kenya as Government Delays Subsidy Payment
The measure is meant to address a price mismatch and ensure undisrupted supply of petroleum products, Kiptoo said. The government has also directed the multinational companies to dedicate a portion of products to independent dealers, who have been worst hit by the shortage, he said.
The difference between the current set prices and rates from the additional cargoes “will be loaded in the next price review” which will take effect April 15, Kiptoo said. “We don't know yet how much it will amount to.”
The new deal means Kenya is likely to spend more on its fuel subsidy program. Retailers have been selling at prices that exclude profit margins since December, according to information from the energy regulator.
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