Fuel consumption soars, defying high pump prices

May 27th, 2011 | By | Category: Media Release

Fuel consumption jumped to a one-year high in March on increased demand from agriculture and tourism sectors, defying record high pump prices.

Latest data from the Ministry of Energy indicates that 320,000 tonnes of fuel were consumed in March 2011 up from 285,300 tonnes in March last year, with the bulk of consumption going to diesel fuel, jet fuel and fuel oils.

According to Mr Peter Nduru, the Director for Petrol at ERC, the jet fuel component – which recorded a all-year high of 68,000 tonnes - was buoyed by the high tourism season characteristic of the first few months of the year and said increased agricultural activity could explain the diesel figures.

“The first quarter of the year is a high tourism season with arrivals and departures spurring the demand for jet fuel,” Mr Nduru said.

This spike in consumption comes at a time when statistics show that the total fuel consumption increased slightly last year. But the cost was 25.3 percent higher than the previous year due to increasing international crude prices.

First quarter tourism results indicate that foreign arrivals rose between January and March by 15 per cent to reach 313,691, compared to 272,424 registered during a similar period in 2009.

Consumption of jet fuel in the country starts increasing in the month of November each year, as more tourists visit the country, escaping the winter season in Europe and America.

Even with this high consumption, the Economic Survey 2011 shows that whereas the domestic demand for oil products grew from 3.7 million tonnes in 2009 to 3.9 million tonnes last year, in 2009, 4.1 million tonnes were imported compared to 3.8 million tonnes last year, which was a 7.8 per cent reduction. The difference in demand and supply was made up by domestic production.

The high consumption figures seem to defy the escalating cost of fuel in the country where the latest revision by the regulator Energy Regulatory Commission (ERC) two weeks ago increased costs of all petroleum products – holding a five month trend.

Diesel oil alone has over the past 5 months gone up by Sh19 but this has not been impetus enough to cut back on consumption, with 117,000 tonnes consumed in March being the highest over the past one year, a scenario which oil marketers attribute to skewed dimensions of the supply and demand of fuel.

Super also high

Regular and super petrol also registered their highest consumption volumes for the first quarter of the year in March, but unlike diesel, this was not the highest over the one year period in review.

The highest registered consumption of petrol was in December last year – 53,000 tonnes.

A few weeks ago, the country was faced with a severe diesel shortage with claims of intense pricing battles over consignments, delay in release of taxation documents and a power shutdown at the refinery being fronted as the reasons for the shortfall.

Although the scenario in most parts of the country is back to normal, cases of a continued shortage in Nyeri are still being reported.

According to oil marketers, this high consumption goes against the natural laws of supply and demand where high commodity costs are expected to depress their demand and in turn, increase their availability.

Mr Jimmy Mugerwa, Country Manager for Kenya Shell said that other than positive economic activity being one of the reasons for this scenario, it proves the long assertion that fuel supply in the country is outstripped by its demand.

“Normally, you would expect the high fuel prices to negatively impact the consumption therefore the only explanation to these figures is that the prevailing demand for fuel has for long surpassed the supply in the region,” he said.

This increased consumption notwithstanding, the high cost of jet fuel internationally has forced many airlines to revise their profit projections for the year with some resorting to increasing fares through introduction of a fuel surcharge cost to cushion their bottom lines.

Article Source: http://www.businessdailyafrica.com/Corporate+News/Fuel+consumption+soars++defying+high+pump+prices/-/539550/1170022/-/item/1/-/a8d7frz/-/index.html




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