(Bloomberg) -- Kenya increased gasoline prices to a record, adding to the pain of motorists already enduring the East African nation’s worst fuel shortages in more than a decade.
The cost of gasoline jumped 7.3% to a maximum of 144.62 shillings ($1.25) a liter in Nairobi, Energy and Petroleum Regulatory Authority Director General Daniel Kiptoo told reporters in the capital on Thursday. Diesel prices surged 8.6% to 125.5 shillings per liter.
The rates for the next month are the highest since Kenya began setting tariffs for gasoline, diesel and kerosene in 2010. The increases add to consumer price pressures after inflation quickened to 5.6% in March, and may lead the monetary policy committee to consider hiking interest rates.
The changes were announced as a shortage of fuel at filling stations entered a third week, with motorists waiting for hours during the day and night to refill. The scarcity is the worst in at least 10 years.
The situation should return to normal in the next 72 hours, Energy Secretary Monica Juma told reporters on Thursday.
The crisis was initially blamed on delays in remitting subsidies to oil marketers, which led to difficulties in delivering fuel. That sparked panic-buying, adding to the shortage at pumps.
“The country had adequate stocks of petroleum and petroleum products to meet its monthly demand,” Juma said, and the government is on course to settle outstanding payments of 14 billion shillings to marketers by April 19.
But “some players were hoarding the product, awaiting the “14th day of the month” price review so as to cash in on the windfall,” Juma said. They also diverted “cargo earmarked for local use for export into the region to further enhance their abnormal profits.”
Juma said that French distributor Rubis SCA’s local unit CEO Jean-Christian Bergeron departed the country in response to local media reports that he was deported after being accused of economic sabotage. Juma didn’t say if Bergeron was deported. The regulator is investigating 10 companies, and whoever is found culpable will be punished.
“Rapid oil price surge has led to the increase in the amount of the government subsidies and extended delays of their payments to the distributors,” Rubis said in a statement. “As a result, the dynamics of supply and demand have led to increasing stock-outs, particularly in the stations of independent Kenyan distributors, increasing the pressure on international distributors like Rubis.”
Rubis Energy Kenya CEO went to the head office in Paris to evaluate the situation, the company said.
Global oil prices have climbed since Russia invaded Ukraine. While Kenya’s fuel subsidy has helped contain the surge, economists have warned that may not be sustainable.
“It will place pressure on public finances if the war lasts longer,” the World Bank said in a report published Wednesday.
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