Pain at the pump as prices skyrocket

April 14, 2011 12:00 am

, NAIROBI, Kenya Apr 14 – Fuel pump prices have gone up to an all time high of Sh111 per litre of super petrol in Nairobi, marking a Sh8 increase after the Energy Regulatory Commission (ERC) adjusted the prices in line with price control regulations.

The maximum pump price for diesel has now been capped at Sh107.52 in the capital city, up from a retail price of Sh100.90 that was being charged in the last one month.

The increase is by far the highest price paid for a litre of fuel since 2008 when motorists paid as much as Sh110.

The ERC releases new maximum pump prices every 14th day of the month but expects oil marketers to compete below the respective prices.

A statement from the ERC indicated that motorists in Mombasa would for the next one-month buy super petrol at Sh107.92, which will be the lowest amount while those residing in Mandera will pay the highest rate at Sh123.69.

The full price list for all major towns can be accessed here.

In Kisumu and Eldoret, consumers will part with Sh113 per litre of super petrol, while diesel will retail at Sh109 per litre.

The ERC attributed the rise to soaring international prices of crude oil and refined petroleum products during March as the price of crude rose by 8.54 percent from $103.6o per barrel to $112.45. Over the same period, the average exchange rate deteriorated from Sh83.55 against the dollar in February to Sh86.30 in March.

ERC Director General Kaburu Mwirichia said instability in major oil producing nations in the Middle East and North Africa continued to exert pressure on international oil prices.

"Other factors influencing prices include economic recovery in the developed countries as well as increased demand from the strong economic growth being experienced in some countries like China and India," Eng Mwirichia said.

During the month of March, the cost of imported kerosene shot up by 13.65 percent from $917.06 per metric ton to $1042.25 further putting pressure on those in the middle to low income bracket who depend on kerosene.

The ERC however said that it had adjusted the maximum allowed wholesale margin of kerosene downwards from Sh6 to Sh4 per litre to cushion consumers. However, with kerosene retailing at above Sh90 in most parts of the country, it is still too high for most citizens.

The increase in pump prices comes amid calls by the Ministry of Energy to the ERC to review the formula used to calculate the retail price of petroleum products as it had failed to fully capture all the fundamentals of the petroleum sector and address the concerns of consumers.

"The international prices have continued to escalate monthly adversely affecting both domestic consumers and oil marketers. We are looking into the issue with the view of having the formula reflect the actual dynamics," Energy Minister Kiraitu Murungi said last week, but ruled out scraping of price controls in the sector as it remained an effective tool for the government to monitor oil prices in the market.

The Petroleum Institute of East Africa has also called for a review of the formula adding that it had developed an industry policy paper that could see pump prices go down by as much as Sh18.

On Wednesday, the Kenya Private Sector Alliance urged the government to liberalise the petroleum market arguing the ERC formula was inappropriate as it uses the price of crude at the international market, disallowing local marketers\’ companies\’ flexibility in pricing.

"If you have open pricing then it is up to the individual companies to compete and you find that the prices tend to be depressed," KEPSA Chairman Eng Patrick Obath said.

Eng Obath also said the pricing formula was responsible for driving up the cost of living especially in the rural areas where people are charged more due to the increased price of distribution from Mombasa.

"Release price controls and let cross subsidy work so that the cost of fuel in the areas that can\’t afford it go down and that way we are able to reduce the cost of living for Kenyans," he said.

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