The Energy Regulatory Authority has maintained cross-subsidy on super petrol, bringing down prices of the commodity by a higher margin but depriving diesel consumers of deeper price cuts.
Super petrol prices fell by Sh3 per liter to Sh189.84 as of midnight on Friday, driven by a combination of a cross-subsidy of Sh2.99 per liter and a global decline in the cost of the commodity.
But the move deprived diesel consumers of an additional reduction of Sh1.77 per litre, meaning that had the cross-subsidy not been implemented, a liter of the commodity would have reached Sh171.33 instead of Sh173.1.
The cross-subsidy has been the subject of a lawsuit and concerns from Parliament on the grounds that it is not legally provided for in the 2019 Energy Act.
Fuel cross-subsidy allows the treasury to share the burden with consumers of one of three fuel grades. However, this concept deprives users of one fuel type of higher price reductions when global prices fall while relieving others when their fuel type prices rise internationally.
Diesel prices in the global market fell by 7.7 percent to $680.20 per barrel according to S&P Global Platts pricing, while super gasoline prices fell by 8.35 percent to $849.52 per barrel.
“In the period under review, the maximum permissible pump price for super petrol, diesel and kerosene decreased by Sh3 per litre, Sh6.08 per litre, and Sh5.71 per litre, respectively,” said Daniel Kipto, director general of the regulator. Energy and Petroleum (Epra) in a pricing notice on Friday morning.
S&P Global Platts is a global provider of benchmark prices for commodities including energy.
Without the cross-subsidy, super petrol prices would have fallen by a margin of less than Sh3 per litre, at the new prices which will be in effect until July 14.
The government resorted to mutual support after it canceled fixing gas station prices last year. The national treasury and consumers of one type of fuel share the burden.
The government initially subsidized diesel with super petrol since diesel is the main driver of the economy.
Last year, a case challenging Ebra's move to implement cross-subsidy was filed in the High Court in Mombasa, with the petitioner arguing that the regulator abused pricing regulations by overcharging super petrol consumers to cushion diesel users.
But the court rejected the petition, saying it was not convinced by the petitioner's argument that mutual support was not provided for in the law.
The law stipulates the stability of pump prices, with the state withdrawing money from the Petroleum Development Fund.
Kenya's Kwanzaa government last year halted a plan to stabilize gas station prices, amid mounting pressure from the International Monetary Fund – currently one of Kenya's main financiers.
But high prices, which at one point exceeded 200 shillings, and public anger over rising fuel prices and costs of living, forced the government to reintroduce the scheme.
Price stability and mutual support were now key in helping the government avoid public anger over rising fuel costs.
Fuel prices are crucial in determining inflation – a measure of the cost of living.
Official data show that inflation rose slightly to 5.1 percent last month from five in April, driven by higher food and electricity costs.