Oil marketers conspire to raise fuel prices as Kenyans brace for tough times ahead


Pedestrians walk past a Kobil service station with the prices display of petrol (US $ 0.84 per ...
Pedestrians walk past a Kobil service station with the prices display of petrol (US $ 0.84 per litre unleaded) and diesel (US $ 0.72 per litre) on a signage in Kenya's capital Nairobi, February 7, 2016. The global oil price is hovering at about $30 U.S. dollars a barrel. REUTERS/Thomas Mukoya

In Summary

  • The marketers want the ministry to force the EPRA to factor in costs related to unsold fuel stocks procured when global prices were higher in Thursday's  price review.
  • The operators are lobbying for EPRA to be required to exclude two April priced cargoes from the review to allow them to sell off their expensive inventory.
  • By attempting to force EPRA’s hand in pricing, the oil marketers have sought to block Kenyans from enjoying the relief accompanying lower global prices.

Oil marketers have made an attempt to manoeuvre existing marketing rules to retain higher fuel costs to Kenyans this month, denying relief to consumers.

In a letter to Petroleum Cabinet Secretary John Munyes, the marketers want the ministry to force the Energy and Petroleum Regulatory Authority (EPRA) to factor in costs related to unsold fuel stocks procured when global prices were higher in the next price review.

“We therefore request your good office to engage EPRA to come up with a mechanism to compensate oil marketing companies (OMCs) on the current exposure pegged on the drop in demand for both premium motor spirit (petrol) and automotive gas oil (diesel) in April 2020,” the marketers note in a letter undersigned by the Chairman of the supply coordination committee and KenolKobil General Manager Martin Kimani.

The marketers want EPRA to consider and adjustment cost of 40 percent of unsold cargoes during the next review set for Thursday even as they fail to mention the size of unsold stocks.

Further, the operators are lobbying for EPRA to be required to exclude two April priced cargoes from the review to allow them to sell off their expensive inventory and any other measure to cushion them from the price exposure.

In essence, the marketers want the government cover them from losses incurred from the fall in global oil prices.

According to Charles Wanguhu, a social activist and coordinator of the Kenya Civil Society Platform on Oil and Gas, such a move would be illegal.

“What oil marketers are seeking is to have the government ensure they make a profit from the unsold stocks of oil. This would have a knock on effect on everything and would be a disservice to consumers,” he said.

Should the oil marketers have their way, Kenyans will pay more for fuel from Thursday even as they are ought to enjoy a lower price as mirrored in the falling global prices.

The Ministry of Petroleum has nevertheless said it has dismissed the lobby from marketers insisting new prices will be set according to the law.

“Prices in Kenya are controlled by a legal notice. EPRA has to conform to the law,” Petroleum Principal Secretary Andrew Kamau told Citizen Digital in a phone interview on Tuesday.

In 2011, EPRA then the Energy Regulatory Commission (ERC) was given the price setting mandate which now sees it set maximum pump prices in the middle of each month as a means to cushion Kenyans from runaway prices at the time.

Global oil prices which then stood at an average Ksh. 106,000 ($100) a barrel have reversed in trend contacting to around Ksh.3, 498 ($33) a barrel in mid-April 2020.

As such, fuel prices have been on the decline with the fall accelerating faster during the Covid-19 pandemic when demand for fuel has likewise reduced from pandemic led disruptions to trade and travel.

By attempting to force EPRA’s hand in pricing, the oil marketers have sought to block Kenyans from enjoying the relief accompanying lower global prices in a means to sell-off older fuel stocks at previous higher prices.

The Consumer Federation of Kenya of Kenya (COFEK) has termed the attempt shameful.

“Oil marketing companies have vindicated our long held view that they are guided more by incessant greed than prevailing socio-economic and legal realities.

“They want to maintain huge profits even as oil producers are literally paying dealers to evacuate oil as a result of low demand in the wake of the Covid-19 pandemic,” said COFEK Secretary General Stephen Mutoro.

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Story By Kepha Muiruri
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