KenolKobil rejects price controls

December 6, 2010
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, NAIROBI, Kenya, Dec 6 – KenolKobil is opposing the government\’s efforts to regulate fuel prices in the market, arguing the move will have an adverse effect on the sector.

The oil marketer says there have been no consultations between the Ministry of Energy and other players who have made investments in the petroleum industry.

In a statement issued to its shareholders, KenolKobil Group Managing Director Jacob Segman said such government interference could lead to a shortage of fuel products in the market, which would significantly destabilise the economy.

Mr Segman said the government should allow for regular reviews by an independent party and must take into account all cost factors influencing the marketing of petroleum products.

"The review should especially take into account infrastructure costs and damaging effects of system inefficiencies," Mr Segman said.

The fuel market remains largely liberalised since 2004, with the government seemingly in favour of a competitive market.

However, the Energy Act of 2006 gives the minister power to control retail prices of petroleum products.

In 2009, the Energy Regulatory Commission (ERC) drafted the Petroleum Price Regulations that spell out a fuel price calculation formula that works out the standard retail prices for petroleum products.

The regulations have however never been gazzetted, limiting the ERC\’s capacity in reigning in rogue marketers who hike prices.

The Ministry of Energy was expected to issue a legal notice that sets the stage for price control last week but this has not happened.

Mr Segman\’s statement came as the State-controlled National Oil Corporation of Kenya announced a Sh4 reduction for diesel within Nairobi, but KenolKobil has now taken issue with the government\’s involvement in the retail business.

"Our company has some concerns with the government controlling inland infrastructure, regulating the industry acting as a marketer (through the National Oil Corporation of Kenya) and most recently importation of refined products," he said.

Oil marketers who ignore the new regulations risk penalties of up to Sh1 million or have their operating licenses withdrawn. 

When the new pricing are enforced, Kenya will join the league of South Africa and Tanzania and will likely change the oil sector.
 

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