Kenya extends fuel supply deal with Saudi Arabia, United Arab Emirates
The new deal could give Kenyans relief at the pump after the government succesfully renegotiated the freight and premium cost with the gulf suppliers.
The current deal which expires in December has failed to stabilize pump prices and prevent the shilling from further depreciation, exposing an already overburdened public to more shocks.
After a long deliberation by the Cabinet on whether or not to continue with the government-to-government oil importation deal, the Kenyan government has finally settled on extending the arrangement.
The new deal signed with Emirates National Oil Corporation, Abu Dhabi National Oil Corporation and Saudi Aramco will now run until December 2024.
Under the new deal, the government succesfully renegotiated the freight and premium cost which will now see diesel landing into Kenya at Ksh.88 down from the current cost of Ksh.118, petrol from Ksh.97.5 per freight to Ksh.90 and Kerosine from Ksh.140 to Ksh.111.7
While this will translate to ease at the pump, a lot will depend on the other factors, including global crude oil prices and foreign exchange rates.
Billed as an easy-immediate fix to Kenya’s costly fuel, the government’s current arrangement with the three Gulf Oil firms has failed to achieve the set targets.
“Fuel marketers and all the people in that space will be able to buy fuel products in Kenya shillings and it will remove the pressure on our dollars. In fact, in the next one month or so, the dollar will come down in a phenomenal way. In my estimation, the exchange rate will come down to 120,” President Ruto promised in April.
“Demand for the dollar will come down, and the shilling will gain and we do not want Kenyans to lose money. So, those who have been hoarding dollars hoping that it will go up, it will go down starting today. Please let the dollars go to the market,” said Deputy President Rigathi Gachagua also in April.
An analysis of Central Bank of Kenya, Kenya Shilling exchange rate on the day the President and his deputy made the remarks shows that the shilling exchanged at Ksh.133.72.
The exchange rate six months later stands at Ksh.146.90.
In ditching the Open Tender System, the government had two overwhelming priorities: The economies of scale in order to bring down the cost of fuel and manage the forex.
But the irony is, that both goals have not been attained: the price of fuel is sky-high, and the shilling continues to weaken against the dollar, and there is every reason to question the government.
And with the program failing to have the intended consequence, the price of petroleum products have surged alarmingly, putting the government under the spotlight over the deal.
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