Treasury seeks funds to reinstate fuel subsidy in U-turn

National Treasury is actively seeking resources to support the reinstatement of fuel subsidies, moving to cushion consumers from escalating retail pump prices. The decision marks a significant policy shift after the administration withdrew the price cushioning mechanisms.

Energy and Petroleum Regulatory Authority (EPRA) announced that the government opted to stabilize pump prices for the pricing cycle to cushion consumers from a spike caused by increased landed costs. The regulator kept retail prices unchanged, preventing petrol from crossing higher price thresholds.

Without state intervention, the price of super petrol would have risen significantly higher in Nairobi. Prices for diesel and kerosene were also slated for upward adjustments before the government stepped in to cover the margin differences.

Oil marketing companies are expected to receive compensation through the Petroleum Development Fund (PDF). The regulator sought to reassure industry executives after concerns were raised regarding recovery mechanisms for cost differences.

Official correspondence sent to chief executive officers of oil marketing companies highlighted the state intention to intervene to ease pressure on citizens. Energy sector administrators moved to resolve worries that low-priced stock introduced into the market would cause price distortions for dealers holding higher-priced inventory.

The arrival of specific lower-priced consignments had previously raised concerns among distribution network operators. Industry players noted that huge price differences between consignments threatened to disrupt supply channels, as dealers hesitated to sell higher-cost stock to resellers.

President Ruto originally ended fuel subsidy programs shortly after taking office, citing the need to transition toward subsidizing production rather than consumption. That decision was intended to manage public spending and meet commitments linked to international financing packages.

Subsequent adjustments to fuel taxes and rising global landed costs generated intense public pressure over the cost of living. The return to price stabilization measures reflects ongoing efforts to balance fiscal management with retail market stability.

The Treasury is also managing historical arrears owed to oil marketing firms, having previously securitized unpaid balances through dedicated fixed-income market instruments. Officials maintain that verified volumes will be fully recovered to protect dealer liquidity and prevent market shortages.

Retail fuel prices in Kenya are reviewed on the fourteenth day of every month by EPRA. Market participants will monitor the sustainability of the stabilization fund as global market conditions continue to fluctuate.