Fuel pumps cannot reflect 5 digits

May 9, 2008
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NAIROBI, May 5 – Oil companies Monday said they were in discussions with the government to work out how the marketers could reflect five digits on their retail fuel pumps.

Kenya Shell Managing Director Eng Patrick Obath told Capital Business News on Monday that the talks could be concluded before the end of the week and the firms could then embark on changing their metres to accommodate such figures.

“After the discussions are complete, we will be able to tell the public how we will manage the change from Sh99.99 to over a Sh100,” he said.

Noting that oil prices in Kenya are $12 behind the volatile international prices which have been oscillating between $117 and $120 per barrel, Obath said once the hitch was sorted out, the marketers would be free to quote their figures.

He also dispelled rumours that the only reason consumers were not paying Sh100 per litre of premium was because the companies were not keen on investing in new pumps due to the huge investments that would be required to undertake such an exercise.

It is estimated that purchasing and installing a new digital machine that reflects more than five digits would cost a company over Sh500,000, while upgrading a mechanical gauge to accept such digits would be in the range of over Sh300,000.
 
“All indications are that we will not have to install new meters,” he expressed.

Obath warned that consumers should expect the local oil prices to hit the Sh100 mark in the next one or two months.

He explained that local firms had been slow in effecting pump prices in line with daily international crude oil prices, as they are based on quotations from the Abu Dhabi National Oil Companies (ADNOC), and they are also dependent on how quickly the supplies are depleted.

“They are also based on how fast the stocks reflecting $120 per barrel are coming in,” he added.

Local oil companies have in the past been accused of being quick to adjust the prices upwards and not showing the same enthusiasm when it came to reflecting a drop in global crude pricing.

Therefore it will remain to be seen how quickly the firms will be adjusting their rates, once they figure out how to reflect five digits on their metres.

It is feared that the high oil prices might slow the COMESA region’s Gross Domestic Product (GDP) rate, which is expected to be 6.5 percent in 2008.

The world experienced stable fuel prices between January and June 2007, but the prices have been on an upward trend indefinitely since then.

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