Will Kenya's G-to-G scheme keep fuel prices down?

As Kenyans wait with bated breath for the upcoming fuel price cycle due in a week, oil prices on the global stage have surged above Sh14,300 ($110) per barrel following US President Donald Trump’s renewed threats to Iran.

Trump, through his Truth Social platform, gave an ultimatum to Iran to reopen the Strait of Hormuz, a key canal passage for ships, or face the consequences of having their key infrastructure destroyed in the ongoing war.

This threat triggered an oil price change, which had started to soften to as low as Sh13,900 ($107) per barrel following reports of a possible ceasefire. 

However, back home, while the Iran war is expected to have a key role in the upcoming prices, as it has affected other economies in the region, the unravelling fuel import scandal complicates the matter. 

President William Ruto has pronounced himself on the matter, vowing to weed out cartels in the sector who, he said, were out to make a killing from the global crisis. 

These events leave Kenyans guessing if prices will at least be held as they are or shoot due to the war in the Middle East. 

Tanzania, which had its cycle at the beginning of the month, increased its fuel prices by Sh50 a litre. Uganda has seen an increase of up to Sh10 in pump prices to retail at Sh183 a litre for petrol, with the government offering a different explanation away from the war. 

“The variation of pump prices at the moment has to do more with the dollar rate and nothing to do with the supply,” explained Patricia Litho, Head of Communication, Ministry of Energy, Uganda, in a television interview. 

In Kenya’s context, however, the US dollar has remained stable even during the crisis, averaging Sh129 and Sh130 on bad days. 

On stocks, both the Energy and National Treasury Cabinet Secretaries have said the country has enough stocks. 

However, the importation of fuel cargo outside the G-to-G arrangement Kenya has with the United Arab Emirates and Saudi Arabia, which has cost some officials their jobs, raises queries about whether fuel supply to the country is as stable as claimed. 

A statement by the Chief of Staff and Head of Public Service, Felix Koskei, on April 4 indicated that the President was aware of the manipulation of data on the country’s fuel stocks to facilitate the importation of expensive products. 

“This appears to have been done to exploit rising global prices and public anxiety, thereby creating a false impression of an impending supply shortfall,” he said.

“This egregious misrepresentation is reported to have led to the irregular procurement of an emergency fuel cargo by the Ministry of Energy and Petroleum.” 

On Sunday, Energy CS Opiyo Wandayi released a statement saying the country has sufficient stocks of products to meet the current demand. 

He said the G-to-G fuel supply framework, which offers Kenya deferred payments in USD to ease foreign exchange shocks, is stable. 

He explained that the fuel imported outside of the G-to-G framework, in anticipation of shortages, costs more. 

“The difference of Sh58,744 per metric ton between the One Petroleum cargo and the G-to-G cargo works out to Sh43.4 per litre, with G-to-G cargo being cheaper by that amount,” he said in the statement. 

Petroleum Principal Secretary Mohamed Liban, Kenya Pipeline Company managing director Joe Sang and Energy and Petroleum Regulatory Authority director general Daniel Kiptoo lost their jobs following the entry of this questionable fuel cargo. 

A ship carrying G-to-G stocks docked at Mombasa port yesterday, with reports that the fuel was procured at a cost of Sh255,000 per ton, which will likely lead to significant retail price hikes in the coming week.

Currently, petrol in Kenya is selling at Sh178 while diesel goes for Sh166. A new price guideline is expected to be announced next week. 

However, the country has witnessed sporadic shortages in some major petrol stations, with claims that this hiccup is artificial in anticipation of increased prices for oil marketers to rake in more. 

In a statement on March 30, President Ruto praised his G-to-G initiative, saying that while the rising oil prices are affecting other consumers globally, Kenya has been cushioned from immediate shocks.