More fuel misery flows at the pump

July 14, 2011
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, NAIROBI, Kenya, Jul 14 – Fuel prices have gone up slightly in the latest review by the Energy Regulatory Commission (ERC), with motorists in Nairobi paying Sh115.39 cents for a litre of petrol.

The new rates will be in force between July 15 and August 14.

ERC Director General Eng Kaburu Mwirichia explained on Thursday that the benefits that could have accrued from a slight dip in international oil prices were unfortunately cancelled out by a weak shilling which affected procurement costs.

“The importers required to buy more dollars to import (their products) and so when the Kenyan shilling has worsened like it did in June by four percent, then it has an impact of increasing the retail pump prices,” he emphasised.

During the period, the average landed cost of imported super petrol decreased by 4.4 percent from $1,1148.70 per metric tonne in May to $1,098.78 MT in June.

There was no let up on kerosene prices which globally also went up by 4.4 percent to $1055.83 MT. when the local prices were worked out, kerosene prices could have gone up by Sh2.45.

However, following the government’s action in April to reduce the profit margin on kerosene to Sh2 in a bid to cushion the poor, the incremental cost will only be 45 cents per litre.

This effectively means that consumers in Nairobi will buy the product at Sh86.16 per litre, Mombasa residents will purchase it at Sh83.37 while those in Mandera will pay Sh98.68.

A bit of reprieve was however recorded on diesel after the (average landed) cost of the imported commodity decreased by 3.81 percent to $1007.20 MT which locally was reflected in a negligible decline of 18 cents per litre.

Diesel will now retail at Sh106.12 in Nairobi, Sh102.88 in Mombasa and Sh108.37 in Kisumu.

The latest prices once again discounted the prediction given by oil marketer KenolKobil which had forecast a Sh2.46 increment per litre citing a depreciating shilling and high demurrage costs.

And while the tendency to give its predictions has put the marketer in a collision with the government, the ERC cautioned against such speculative activities arguing that it is only them as the regulator that have all the components of computing the figures.

Since the beginning of June, international prices for both crude oil and refined petroleum products have been volatile making it hard for policy makers to predict which way the prices in the short term will go.

However Eng Mwirichia was quick to add that should the global prices continue tumbling and the procurement costs decrease going forward, then the regulator would promptly ensure that that is passed on to the consumers in the next review.

There has been a public outcry over the fuel prices that have been edging up despite the existence of the law capping the profit margins.

In spite of the shortcoming however, the DG Mwirichia maintained that the formula is effective as it has helped to cushion motorists and other consumers from profiteering businessmen.

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