Why petroleum is scarce at the pump


The severe shortage of petroleum that began at the weekend persisted Wednesday, causing transport disruptions estimated to be worth millions of shillings.

Nairobi, the capital that consumes close to 70 per cent of Kenya’s total monthly petroleum uptake, has been hit hardest even as industry players traded blame over the causes of the shortage and how long it may last.

Some industry insiders said the supply crisis is the result of intense pricing battles over consignments that were to be shipped in mid March, but could not land at the port for lack of storage space.

“What is happening is that a marketer, who won the tender to import fuel in February brought in a consignment in mid March, but could not land it for lack of ullage forcing the shipment to be deferred to April,” said a senior manager with one of the oil marketing firms, who cannot be named because of interest in the matter.

“The information we have is that dealers have refused to buy the petroleum because the importer, with the help of the Ministry of Energy officials, has pushed the prices up by up to $10 above the price quoted for the tender,” said our source.

Kenya Pipeline Company managing director Celest Kilinda added a new twist to the saga when he attributed the shortage to the failure by importers to raise the necessary guarantees needed to release the oil by last Friday.

“Some of these importers are very small and find it difficult to raise the guarantees,” he said without naming any firm. “They had not raised the necessary guarantees by close of business last Friday. The long weekend therefore meant they could only resume the search for guarantees on Tuesday,” Mr Kilinda said.

The two explanations are in line with Energy minister Kiraitu Murungi’s statement on Tuesday that the country has enough stock of petroleum and that the shortage was linked to delayed payments by the marketers.

The challenge of guarantees was behind the acute shortage of fuel that rocked the country in December 2008 resulting in the collapse of Triton, a small oil marketer that had come to dominate the petroleum importation business.

An acute shortage of petroleum has persisted in Nairobi over the past four days causing long queues at the few stations with stocks.

Hundreds of cars stalled and public transport operators increased fares by up to 200 per cent as more private motorists hopped into matatus to work.

The fare increments came despite the fact that most of the matatus use diesel whose supply remained steady.

It is estimated that persistence of the petroleum shortage could slow down movement of people and goods in the country with serious economic ramifications.

Kenya Shell country manager Jimmy Mugerwa blamed logistical delays resulting from the public holiday for the supply shortage.

“For the past three days we have been low on stocks since the product that we received on Saturday was cleared late and we only managed to deliver it much later,” Mr Mugerwa said.

He said that the taxation and clearing paperwork required was not done on time and insisted that there are enough stocks in the pipeline to ease the situation would in the next two days.

“The Kenyan market is logistically constrained and in the event that a small bleep occurs, the country goes into a mini crisis,” he said.

A shutdown at the refinery caused by a power failure late last week has also been linked to the supply shortage.

Top oil firm by market share Kenol-Kobil said such shutdowns directly translate to less amounts of products being released to the market.

“We have not been getting enough supply from the refinery due to a shut down that occurred last week and this affected our super petrol stocks,” KenolKobil’s public relations officer Charles Njogu said.

David Ohana, the company’s general manager, said attempts to ease the situation by getting approval from authorities for the discharge of a cargo ship in the high seas has not borne fruit.

“We tried to address this situation by asking government to discharge our vessel so as to ease pressure at our 180 service stations but this has not been granted,” Mr Ohana said.

However, the problem does not appear to be oil availability, as the system according to Energy Regulatory Commission and also marketers is stable.

By Tuesday evening, Kenya Pipeline reported it had received processing orders from various companies.

Oilibya requested 500,000 litres; KenolKobil 460,000 litres while Oilcom 631,000 litres.

A ship, PVT Dolphin, was also in the process of discharging petrol at Mombasa on Wednesday.

The independent dealers say they have not had supplies since Saturday and blame the price regulation for the crisis.

They say wholesale prices have been rising with each new price ceiling.

“The situation is very bad right now and our members have run dry. We were experiencing healthy competition between majors and independents before but now they keep raising wholesale prices,” said Kenya Independent Petroleum Dealers Association chairman Keith Ngirachu.

“How do you control price of a product you don’t have?”

The fuel crunch comes as Kenyans grapple with the effects of high global crude prices.

On April 18, 2011 the government announced reductions of Sh2.06 and Sh2.16 on diesel and kerosene respectively, bringing the new prices to Sh105.44 and Sh88.73 per litre.

Kerosene is set for a further Sh5.04 reduction if Parliament approves proposals to scrap all taxes for the commodity.

ERC had blamed the delay in price revision on slow release of data on untaxed oil stocks by the Kenya Revenue Authority.

While the petrol shortage may largely affect private motorists and non-commercial fleets, the disruption of economic activity, however, short-lived, may only worsen the situation made worse by drought and double-digit inflation levels.


Article from: http://www.businessdailyafrica.com/Corporate+News/Why+petroleum+is+scarce+at+the+pump/-/539550/1156526/-/item/0/-/4e50mb/-/index.html







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