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Kenya seals deal for cheaper Saudi fuel
State-owned National Oil Corporation of Kenya will from August start shipping fuel from Saudi Arabia at lower prices than the global rates in the latest push by the government to lower pump prices. Martin Chomba, Chairman, Petroleum Outlets Association of Kenya joins CNBC Africa for more.
Thu, 30 Jun 2022 11:16:22 GMT
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AI Generated Summary
- Kenya to start importing fuel from Saudi Arabia at lower prices than global rates from August to lower pump prices.
- Deal aims to ensure steady supply of petroleum products and stabilize market prices in Kenya.
- Government considers phasing out fuel subsidy program and shifting cost burden to the public.
Kenya's State-owned National Oil Corporation is set to begin importing fuel from Saudi Arabia at lower prices than the global market rates starting in August. This move comes as part of the government's efforts to lower pump prices in the country. Martin Chomba, Chairman of the Petroleum Outlets Association of Kenya, shed light on the details of the deal in a recent interview. The agreement between Kenya and Saudi Arabia aims to ensure a steady supply of petroleum products in Kenya and stabilize the market prices. Following a fuel crisis in March, the national oil management, mandated by the government, initiated discussions with Aramco, Saudi Arabia, to secure a cost-effective and reliable source of fuel. The deal guarantees a 30% importation quota for the country, with plans underway to implement the agreement. However, Chomba expressed skepticism about the ambitious timeline, suggesting that certain logistical and contractual issues may cause delays. The exact pricing details of the contract remain undisclosed, but Chomba emphasized that long-term supply and a guaranteed volume are key components to secure lower prices. Although the geopolitical landscape may affect pricing fluctuations, the deal is expected to benefit non-fuel petroleum dealers and ensure strategic reserves for the state. The plan is to ease the burden on consumers by introducing competitive pricing in the market. While the deal has the potential to reduce pump prices, global geopolitical factors may hinder immediate price drops. Chomba highlighted that concerted efforts at a global level are necessary to address the current upward trend in fuel prices. On the government front, the fate of the fuel subsidy program remains uncertain. The Kenyan government previously resolved to continue fuel subsidies, but discussions are ongoing regarding the gradual phasing out of the subsidy. The government is considering a hybrid model where they gradually reduce the subsidy and shift part of the cost burden to the public. This transition is expected to occur in the coming months as the government aims to stabilize the market and promote market equilibrium. Overall, the deal with Saudi Arabia marks a significant step towards securing affordable fuel prices in Kenya and fostering a competitive market landscape.
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