Outrage over rising fuel costs

February 15, 2011
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, NAIROBI, Kenya, Feb 15 – There\’s outrage from the public that they are not feeling the effects of recent price controls in fuel pricing, barely four months since the government gazetted price controls in the sector.

A cross-section of Kenyans interviewed by Capital Business expressed their dismay at Monday\’s upward revision of the pricing which will see motorists in Nairobi pay Sh98.08 per litre of super petrol, which is Sh2.40 more than what they paid from January 15 to February 14.

"That increment is very high. Recently, it was Sh93 (per litre,) then it went up to Sh95 and now is Sh98? That is definitely going to affect us," said a discontented motorist.

"This is not working for me. Before the fuel price control, I used to fuel at my \’local\’ at Sh5 below the mainstream fuel stations prices. Now, my local sells at just around Sh1 below the control price. Something is not right," Jeff commented on the Capital FM website.

These sentiments echo those voiced by the Consumer Federation of Kenya that argued that the formula-based regulations have not cushioned consumers from the oil price fluctuations as had been expected.

"We have learnt, with concern, of the continued monthly increment of fuel prices even after the Energy Minister Mr Kiraitu Murungi and the Energy Regulatory Commission publicly pledged a reasonable price capping and one that did not necessarily amount to price controls. That the Sh100 per litre mark is about to be hit is no good news at all," said the federation in a statement released on Monday.

The new pricing is the third since the regulations were effected in December last year.

Mandera motorists were in January paying Sh107.21 per litre of super petrol and will in the next one month pay Sh109.62 compared to those in Mombasa who paid  Sh92.53 January and will buy a litre of super petrol at Sh94.93 in the next one month.

Kenya Private Sector Alliance (KEPSA) Chairman Eng Patrick Obath who does not supported price controls said, the scenario calls for a rethink of the fuel regulations saying they have had the adverse effect of impoverishing the rural poor.

According to him, motorists in the rural areas are paying 30 to 40 percent more than those in the urban areas, a phenomenon he attributed to the \’rigid\’ formulae. He further said that the country was better off without this law which he said was a \’populist\’ decision.

"Before (the prices control was effected) market forces worked and as such where people couldn\’t afford fuel, the price was lower and you (marketer) could get your volume but where people could afford it, it was a little bit higher so you balanced out the equation," he argued.

While pointing out that local pump prices will continue to rise to reflect the situation in the global arena, he said motorists need to learn how to be fuel efficient.

"The reality is that that is the price of fuel that you are going to have in Kenya. What we need to start doing is start using that fuel more efficiently. In the USA people are buying smaller cars, in Kenya we are buying bigger cars. So we need to start using fuel more efficiently because it\’s going to become more expensive," he opined.

Bidco Oil Refineries Chief Executive Officer Vimal Shah concurred adding that the price controls would only work if the government if willing to subsidise some of the costs.

"Price controls have never worked in any country unless the government is willing to say we will take away the extra cost and give you a fixed price. The government would then have to foot that bill to subsidise the consumer who will then think that the commodity is cheap and will therefore continue to use it," Mr Shah said.

But as the debate rages on over whether the price controls were good for the country or not, a source told Capital Business that without the laws, fuel would currently be retailing at around Sh105 per litre.

A dealer confessed that many of them would have started effecting the increase in December last year when the international crude oil started going up and they would have factored in the rise in January and February as well.

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