Oil Producers’ Efforts to Jeopardize Ruto’s Subsidy Plan

President Ruto’s plan to scrap subsidies will encounter tough hurdles after top world Oil producers agree to cut exports to prevent revenue erosion.

The world’s top oil producer, Opec+, agreed on Wednesday to reduce oil production by 2 million barrels per day. This will push the price to $100 per barrel since July.

The group comprises 13 members, including Russia and Saudi Arabia, and has argued that the move has been fueled by the need to stabilize oil prices.

Global oil prices had been falling. For instance, in august, the average landed cost of petrol at the port of Mombasa had dropped. However, Opec+ has dimmed hope for a drop in oil prices, projecting Kenya’s decision to remove the subsidies.

“There was hope that the drop in global fuel prices might start filtering through the economy. Net importing countries like Kenya had been hoping for more relief, particularly with removing the subsidy programme,” said Ken Gichinga, chief economist at Mentoria Economics. “But now, the price drop might not be as significant as we had expected.”

“The price of crude oil has come down. We would hope that this will continue going down. We expect that the other countries’ direction, the US in particular [which has been releasing oil from its strategic reserves], will continue pushing this lower,” Central Bank of Kenya governor Patrick Njoroge told a press conference on September 30.

The US spokesperson criticized this move and argued that Opec+ aligned with Russia, which was hurt by the reduced oil prices.

President Ruto said that the prices are excessive, causing artificial shortages of the products being subsidized.

Because of the limited output by Opec+ nations, pump prices would undoubtedly increase along with inflation, which reached a 63-month high of 9.2 per cent in September.