, NAIROBI, May 28 – The Government on Wednesday painted a grim picture over the fuel crunch in the country, when Energy Minister Kiraitu Murungi revealed to Kenyans that the state could not cushion them against escalating prices.
“The energy Regulatory Commission has advised me that it is not prudent to introduce price controls at this time,” the minister uttered at a press conference in the capital city.
Local pump prices have risen to record levels in the recent past.
The price of unleaded premium petrol in the affluent areas of Nairobi is currently retailing at Sh102 per litre, while in downtown Nairobi one litre of fuel is going for Sh95.
The Minister was quick to explain however that the sky rocketing oil prices ‘were indeed not the making of the government’.
He attributed the fuel crunch to unprecedented high demand for petroleum fuels in the global economy and increased supply constraints caused by reduced production from mature oil fields.
“I wish to assure consumers that there has not been any increase in the level of taxes on petroleum products, the last increase was on the road maintenance levy in the budget speech of June 2006,” he assured.
The general public perception has been that the introduction of price controls could result in reduced pump prices, and owing to a recently enacted law that allows the government to regulate fuel prices.
According to Section 102(W), ‘the Minister may, on the recommendation of the Energy Regulatory Commission, make regulations determining the retail prices of petroleum products’.
But the government has defended that a study undertaken on the profit margins of oil marketing companies had revealed that the companies were not making unreasonable profits.
Prior to October 1994, the prices of petroleum products were controlled by the government.
The procedure involved an agreement with oil companies on all the parameters that are to be incorporated in a pricing formula, which included procurement costs, industry working capital costs, industry managed costs and a return on investment.
The period of price controls was characterised by periodic stock-outs particularly kerosene and Liquefied Petroleum Gas (LPG), low investments and lack of innovations in the retail network development.