Ministry clashes with fuel firms over prices


The government on Tuesday clashed with oil companies over reports that the price of petrol could go up next week.

It was responding to a statement by KenolKobil, one of the large oil marketers, that the price of petrol is likely to go up by as much as Sh6 next week.

Energy permanent secretary Patrick Nyoike termed “reckless, irresponsible and alarmist” warnings by marketers that the price could go up.

So far, the price of petrol has gone up by Sh11 a litre over the past two months.

Last week, Nairobi and other parts of the country ran out of petrol, leading to four days of chaos during which motorists queued for hours to fill their tanks. The government is unable to guarantee that this will not happen again.

Though the price of oil has gone up internationally and the supply chain is quite obviously disastrously inefficient, there have also been fears that the involvement of the political elite in the importation of oil may have resulted in higher prices.

That would explain why small companies have been winning the tender to import oil for Kenya and Uganda under the so-called OTS mechanism.

On Tuesday, Mr Nyoike defended Gulf Energy, which has frequently won the oil importation tender, saying, the firm has not enjoyed any political patronage from top officials at the Energy ministry.

Mr Nyoike denied reports that Gulf Energy was getting undue advantage over more established oil companies because it was favoured by top ministry officials.

Critics had accused the company of lacking capacity to deliver the huge quantities of petrol required, leading to the shortages.

“Gulf Energy is not politically correct, these are lies being peddled by its competitors. Who is behind Gulf Energy? Nyoike is not behind Gulf Energy, the honourable minister is not behind Gulf Energy. I don’t know of any (political) heavyweight behind Gulf Energy,” the PS said.

Mr Nyoike claimed that the company had the capacity to deliver large quantities of petrol because it had entered into a financing arrangement with a French firm.

Mr Nyoike accused KenolKobil of lacking the capacity to predict fuel prices. Only the Energy Regulatory Commission (ERC) is mandated to set the pump prices, he said.

“The report of prices going up is irresponsible, alarming and reckless. The figure given is based on rocket science. I cannot be guided by what KenolKobil said because they cannot inform me anything. I do not, however, want to pre-empt what ERC will say,” the PS said.

Announcing prediction that prices would rise, KenolKobil said it was based on the fact that international oil prices have been on the rise and the emergency delivery ordered to cover for the recent shortage.

Other industry players, who spoke on condition of anonymity to avoid antagonising the government, warned Kenyans to brace for hard times ahead as the price of petrol and diesel could go up in the next few days.

They attributed this to the rising international prices and the pricing formulae employed by the industry regulator to determine oil prices.

The players said the price of kerosene and diesel would have gone up by up to Sh10 had the government not intervened by cutting the prices initially by Sh2 and days later, by another Sh5.

The Sh2 price reduction on kerosene and diesel announced by Finance Minister Uhuru Kenyatta has already taken effect, but the industry regulator has stated that the additional Sh5 cut announced by Prime Minister Raila Odinga a fortnight ago would take time before being effected.

“If the prices are left to the forces of open market, the price of petrol and diesel in Nairobi could go up by up to Sh10, but we expect that the government will be very protective meaning it may only increase the price by Sh4 or Sh5 at the very highest. This is really hurting oil marketers because the government is not factoring in the increasing international prices when applying the formulae,” a senior manager at a local petroleum company complained.

The government, however, warned that the country could yet again experience a shortage of petrol if Kenyans resort to panic-buying of the commodity.

“The ministry would wish to advise the general public that the country has adequate stocks and should therefore avoid panic buying,” Mr Nyoike said.

The PS attributed the massive shortage experienced last week to the fact that there was a shortfall of seven million litres of super petrol imported by KenolKobil, resulting in major marketers such as Kenya Shell and Total receiving inadequate supply of the commodity.

The situation was compounded by a massive blackout that affected the Kenya Petroleum Refineries in Mombasa, resulting in a shutdown.

“The Kenya Pipeline System was affected by delayed evacuation and was shut down on Thursday 28th April 2011. The expected shortfall of super petrol arising from KPRL failure to produce was 20 million litres,” Mr Nyoike said.

To cushion the public against any shortages in future, the government has directed the two firms that have won the tender to import the next supply of petrol — Gulf Energy and KenolKobil — to increase the quantities of super petrol to meet the shortfall, Mr Nyoike announced.

The fuel is expected between May 22 and between 24 and June 1 and 3.

The PS announced that Kenya Revenue Authority (KRA) had also issued a circular telling its employees that they would henceforth work 24 hours a day, seven days a week to serve oil companies seeking to pay taxes before removing their fuel from Kenya Pipeline depots.

Cause of delays

Oil firms are required to pay taxes before they can take their fuel from Kenya Pipeline depots — another cause of delays.

The government has also reduced the period that oil companies are allowed to store their products at Kenya Pipeline depots while arranging to pay taxes to KRA from 30 days to 10 days to eliminate the delays in the movement of fuel, the PS said.

The high cost of fuel, which is driving up the cost of living, is causing concern among leaders.

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