Oil firm warns of Sh5.90 jump in fuel prices

May 9, 2011 12:00 am

, NAIROBI, Kenya, May 9 – The high fuel costs that have gripped the country since January do not appear likely to let up anytime soon with KenolKobil warning of a Sh5.90 jump in pump prices during the May adjustment expected this week.

The estimated jump will push prices to a new all time high of Sh116 for a litre of super petrol from the current Sh111, when the Energy Regulatory Commission (ERC) releases new price caps on May 14.

In a statement, KenolKobil Managing Director David Ohana said crude oil was trading at $120.70 per barrel in April, an increase of $8.15 over the price in March.

With no let up to the turmoil in the Middle East and North Africa, Mr Ohana does not expect pump prices to come down.

"There are already signs of other countries experiencing unrest such as Tunisia, and Morocco which could spread to (oil producing) countries in the region which could in turn affect the supply of oil resulting in higher prices," Mr Ohana said.

Last month, 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 $103.60 per barrel to $112 per barrel.

The ERC is scheduled to release new price adjustments on May 14 that will cap the maximum pump price until the next review in June.

This latest remarks will not sit well with most Kenyans who have been exposed to rising commodity prices since January as the price of fuel has continued to rise.

Many blame the rising fuel prices locally to the price controls that were introduce by the government in December 2010.

The Kenya Private Sector Alliance has 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 oil marketers flexibility in pricing.

Energy Minister Kiraitu Murungi has however ruled out scrapping the formula on price control arguing it remained an important tool for the government to monitor oil prices in the market, instead directing the ERC to review the formula.

Oil marketing companies also want the formula scrapped arguing it fails to capture costs incurred from delays brought about by challenges in importation, storage, transportation and distribution of petroleum products to meet the rising demand.

The Petroleum Institute of East Africa has said oil marketers had developed an alternative formula that could bring pump prices down by as much as Sh18, but there is still no word whether the ERC will implement the recommendations.

Follow us TWITTER @CapitalFM_Kenya and author at https://twitter.com/MjKaranja


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