Questions over ‘opaque’ fuel pricing regime after hold in fuel costs


Questions over ‘opaque’ fuel pricing regime after hold in fuel costs

In Summary

  • While consumers marked relief after the omission of a widely expected price increment, suppliers who make up part of the petroleum sector value chain have bitten the bullet in cushioning consumers.
  • The Motorist Association of Kenya (MAK) has warned of  foul play in the pricing formula as it further doubts the autonomous of EPRA in setting fuel costs.
  • Fuel controls by EPRA, then the Energy Regulatory Commission (ERC) were established in 2010 as a means to cushion Kenyans against runaway fuel costs that characterized the period.

Questions have emerged over the mechanism deployed by government in leaving fuel costs unchanged in its latest pump price review effected on Wednesday.

While consumers marked relief after the omission of a widely expected price increment, suppliers who make up part of the petroleum sector value chain have bitten the bullet in cushioning consumers.

Supplier margins which are held at constant in the fuel pricing formula for instance fell to Ksh.7.95 from a high of Ksh.12.39.

Margins earned from the supply of diesel and kerosene meanwhile fell to Ksh.10.08 and Ksh.8.89 from Ksh.12.36 respectively.

Attempts by Citizen Digital to obtain an explanation to the curious deduction from the Energy and Petroleum Regulatory Authority (EPRA), the Ministry of Petroleum and the National Treasury did not bear fruit by the time of publishing this article.

Other stakeholders in the petroleum value chain have nevertheless raised suspicion on probable external interference in the pricing regime.

For instance, the Motorist Association of Kenya (MAK) suspect foul play in the pricing formula as it further doubts the autonomous of EPRA.

“The explanation given by EPRA causes more suspicion on the faithfulness to the bargained formula whose aim was to stabilize and make predictable the fuel prices not only to safeguard the consumer but ensure the ramifications of high duel does not only affect the country’s economy adversely,” the association said in a statement on Thursday.

“Without the power to control the above concerns, the authority loses its purpose of why it was created. It is sad the confusion has taken the country where it was before the price controls were lobbied for.”

Nevertheless, the Ministry of Mining and Petroleum has been working behind the scenes to develop a price stabilization mechanism to cushion Kenyans against high petroleum costs.

While appearing at Senate’s Energy Committee last month. Petroleum Cabinet Secretary John Munyes said the ministry was working on draft regulations to make operational the Petroleum Consolidated Fund (PCF) for the cushioning purposes.

The fine print of the regulations including the inner-workings of such a mechanism are however yet to be issued prompting more questions as to how cushioning measures would have been effected at this stage.

Moreover, the Ministry of Petroleum has previously fronted a diesel and petrol subsidy program but whose accompanying regulations are yet to be unwrapped.

The mechanism is nevertheless based on two analogies; one, establishing a price ceiling after which consumers are cushioning against greater costs and two, cushioning the rate/size of fuel price increments in the traditional mid-month maximum pump price review.

Fuel controls by EPRA, then the Energy Regulatory Commission (ERC) were established in 2010 as a means to cushion Kenyans against runaway fuel costs that characterized the period.

The government has nevertheless come under fire in recent years for milking its oversight role in pricing to sneak in new taxes and levies negating benefits to consumers from retreating international prices.

The breakdown of petrol costs in Capital Nairobi for instance exposed the weighting of taxes and levies on the final retail price paid by consumers.

A motorist in the Capital will for instance pay Ksh.122.81 for a litre of petrol out of which taxes and levies account for Ksh.57.58 or an equivalent 46.9 per cent of the price.

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Story By Kepha Muiruri
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