Oil retailers plan five digit pump price

May 9, 2008
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NAIROBI, May 7 – Oil companies Wednesday said they were in discussions with the government to work out how the marketers can reflect five digits on their retail pump.

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

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

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 why 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 reflect 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 one hundred shillings mark in the next one or two months.

He explained that local firms have been slow in effecting pump prices in line with daily international crude oil prices as they are based on quotations from Abu Dhabi National Oil Companies (ADNOC) and they are also dependent on how quickly the supplies they had 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 for being quick to adjust the prices upwards and do not show the same enthusiasm when it comes to 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 meters.

It is feared that the high oil prices might slow down 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 fuel prices have been on an upward trend indefinitely since then.

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