Fuel prices to drop at KenolKobil stations

November 24, 2010 12:00 am

, NAIROBI, Kenya, Nov 24 – Fuel marketer KenolKobil has announced that it will reduce fuel pump prices by at least Sh4 per litre in the next two days.

The company said the move was in response to mounting public pressure over spiralling costs, with unleaded petrol retailing at an average of Sh100 per litre in recent weeks.

"We started rolling out the price reduction from Monday as we need to do it countrywide and so you will see us coming to between Sh98 and Sh99 for the petrol," said General Manager David Ohana.

The operator currently has the highest pump prices in the market with a litre of super retailing at Sh102.4 although the recommended cost should be about Sh94.70.

The company\’s announcement – which is likely to be adopted by other operators – comes two days after the government disclosed that it had forwarded to the Attorney General a legal notice to regulate the fuel prices.

While it may be seen by some as an attempt by the marketer to try and dissuade the government from effecting the price caps, Mr Ohana said the move was prompted by the need to ensure that the country is well stocked as the festive season nears.

"KenolKobil has a lot of fuel in our depots in Mombasa and I can promise our customers that they will not experience any dry outs," the GM said.

Although Mr Ohana said they were guided by fundamentals in the international crude prices, he decried the infrastructural inefficiencies at the Kenya Pipeline Company and the Kenya Petroleum Refineries Limited which he said cost oil companies millions of shillings in transportation and demurrage costs.

These charges are then passed on to consumers.

Although the price cut will be a welcome relief for motorists, the government appears intent on curtailing the cartel-like behaviour in the industry which sees the marketers quick to adjust their costs upwards at the slightest reason but slow to lower them to  reflect the costs in the international arena.

Energy Assistant Minister Langat Magerer said once they received a response from the Attorney General on the legal notice, the minister would then be at liberty to publish the regulations.

"Depending on the advice and input that we get from the AG, it will then be up to the minister (to decide when to publish the regulations)," he said although he declined to say when this was likely to be done.

This is the second time that the Energy Ministry is attempting to re-introduce price control in the sector after a formula developed by the Energy Regulatory Commission (ERC) last year on how to effect this move was rejected by the National Economic and Social Council.

This seemed to give the operators a leeway which they have exploited to arbitrarily increase their prices to about Sh10 per litre in the last few weeks.

But at a press briefing on Wednesday, the ERC seemed to absolve itself from blame saying the failure to gazette the control formula which would see petrol, paraffin and automotive diesel prices capped at recommended price had rendered it powerless.

It remains to be seen whether the government will make good its threat and enforce the measures in the liberalised industry.

The parliamentary committee on Energy has in the meantime summoned Finance Minister Uhuru Kenyatta to explain the runaway retail fuel costs.

Energy Committee Chairman James Rege said Mr Kenyatta and the National Economic Social Council Secretary Julius Monzi were to appear before his team to explain why they were opposed to regulation, which would translate to cheaper fuel pump prices.

“The Kenya Revenue Authority MD will also be present to discuss the possibility of tax reductions on petroleum products which will further cushion the consumers,” Mr Rege said.

Members of the committee Edwin Yinda and Emilio Kathuri also said they were contemplating to move a motion in the House to bar the oil multinationals from exploiting Kenyans.

“The Energy Regulatory Commission is supposed to act.  If they do not perform, Parliament has the power to disband it and also create another body to regulate energy.  We are not going to sit back and leave the rogue oil marketers to more or less hold the country at ransom.”



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