Kenya’s Fuel Crisis, How Did We Get Here?

Fuel shortage in the country, which has escalated for the third week now, sent motorists in a frantic panic as they ran up and down in search of the commodity, causing price hikes and leaving passengers stranded at major bus stops.

From long queues to a limited amount of fuel at high costs and lack of fuel ins some stations, Kenyans have been frustrated and disappointed. Some vehicles had to step off the road due to lack of fuel.

The overall effect of all these is the double increment in the transport costs passed to the passengers as witnessed in major towns such as Kakamega and Nairobi and delays in kicking and arrival times of the vehicles.

Farmers are among the many whose activities were also disrupted by the acute oil shortage. They could not transport farm inputs and products to the farms and markets, respectively.

In a bid to curb the recent commodity shortage, the Government released 34.4 billion shillings to the oil markets on Monday 4^th, 2022, as a subsidy and to cater for the 13 billion shillings 3-month arrears demanded by the oil marketers.

But even with this, how sure are we that the situation will resolve sooner enough to allow activities to go back to normal?

The situation has been primarily attributed to the disruption of commodity prices in the global market caused by the ongoing war between Russia and Ukraine. What will happen now that the war is still on? Does it mean that even with the available subsidy, the country might still witness hikes in fuel prices?

With Oil prices standing at over USD 120 per barrel in the global market, coming out of this quickly looks near impossible. That’s if it is the main factor driving the shortage.

But even before we get there, the big question that Kenyans have been asking is how we got here and why now?

This question has to be answered right to avoid any future repeat of what we have witnessed. The question of who we should blame for the crisis is out of topic because playing blames games would only worsen the situation.

ALSO READ: Normal Fuel Supply to Be Restored Beginning Thursday

According to the Institute of Economic Affairs CEO, Kwame Owino On His Twitter account, the issue is not just about the Government not making its payment promptly; it is a pointer to the overall financial position and the institute of price management mechanism that it cannot afford.

In the last six weeks, global prices have been rising. To keep the domestic prices lower, the Government had to institute the price stabilization Fund, which was to be an agreement between the Government and the oil marketers.

In 2021, the parliament had raised issues concerning the fund, citing that it was established without a proper legal mechanism.

Nonetheless, the agreement saw the marketing firms keeping the retail prices of fuel below the real prices based on the EPRA formula on the basis that they would be refunded the amount promptly by the Government.

However, the turnout of events shows that the Government did not keep its end of the bargain. The marketing firms had not recovered their operating cost, and the cash flow was affected.

For this reason, the marketers got reluctant because they were unable to take stock and sell fuel. Furthermore, they would have accrued more losses if they sold the same to Kenyans.

Even in the middle of the crisis, the Government had assured Kenyans that there was enough fuel in the country, citing that it was just a problem of getting into the pumps.

This might seem contradictory to other statements made by the Government, but the whole process that caused the shortage still jolts down to the global market and how it has affected domestic markets, in this case, Kenya.

Other countries in Africa, like Uganda and South Africa, have also been facing similar problems of fuel hikes.

Even though Most Kenyans are happy that it’s good news and reprieve at long last, we could be headed for more brutal days ahead if the European war continues affecting the global market.

Adding to the drought and the continuous increase of basic commodities in the country, this might be projecting survival for the fittest soon.