Price controls not the answer to fuel costs

As petroleum prices soar, with the Government amazingly unable to ensure adequate supply of a commodity indispensable to daily life, it is not surprising that many Kenyans are demanding the reintroduction of price controls.

But these public frustrations, the incompetence and the doubletalk from the Ministry of Energy should not lead us down the slippery slope of anti-free market arrangements.

Such a policy has been tried before and it failed disastrously. What Government needs to do is protect consumers through policy decisions such as reducing taxes.
Pumping billions of shillings into the State-owned National Oil Corporation (NOCK) to increase its market share is also not a solution. NOCK is not immune from the corruption and executive meddling that have brought other public trading companies to their knees.

Price controls aside, government should not be directly involved in business. Getting into business is completely contrary to current policy of divesting from active trading.

The truth is Government cannot do business. Kenya is committed to privatisation of State corporations because we know the heavy losses they incur and the fortunes they drain from public coffers.

In addition, there is no guarantee that NOCK, however much capital is injected into it, would stabilise oil supply under the current procurement and distribution system unless it became a monopoly.

Monopoly of course is the antithesis of open competition and an enemy of low prices for consumers. The government should also be able to revoke licenses of those oil marketing companies which violate free market principles and also engage with cartels whose only interest is maximum profit at all costs. 

It is unbelievable that the government has taken no action to enforce conditions attached to their licenses.  

Coming at the end of a long drought which pushed food prices to astronomical heights, the fuel crisis adds an explosive dimension as it affects the prices of all commodities.

It is astonishing that the President had to summon the top Energy Ministry officials to get them to immediately resolve this crisis, after which they promised there was no crisis and that supplies would be restored the following day.

 That was in fact done – only for the country to discover the day after that there is an even greater fuel crisis in the making! This is about to drive up fuel costs substantially.

It is clear that there is a conflict of interest underlying some of the decisions being made on energy policy. Unless this conflict of interest is also addressed, and it must, there is no hope of ensuring that Kenyans get a fair deal in energy.

Have you not heard of the saying \’Hii ni mali ya serekali- wacha tuponde mali\’?

(Mr Njonjo is a businessman, elder statesman, former MP and ex-Attorney General)

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