Poor Kenyans lose out in the regulated retail oil market

The lowest paid Kenyans have emerged the biggest losers in the newly regulated oil market as fuel dealers increased Kerosene and diesel prices to compensate for losses arising from low cap of motor fuel.

Oil marketers have increased the price of a litre of diesel by Sh2 and that of kerosene by up to Sh5 as they lowered the motor petrol by Sh4.50 a litre in compliance with the government price list that will run until January.

While easing the burden on middle class Kenyans, the rise in Kerosene prices will eat deep into household budgets of the low earners who rely on the commodity for lighting and cooking while expensive diesel is unlikely to ease pressure on the runway transport costs .

More money

“Marketers are happier now as they will make more money. Kerosene went up by Sh6 and diesel is up by Sh2 per litre,” said an executive at Gapco Oil, who requested not to be named.

OiLibya expressed similar comments, arguing that diesel prices in the wholesale market had risen from Sh76.50 a litre to Sh84.50 following the government directive, setting the stage for a fresh review at the retail pump stations.

The price movements are set to raise questions over the effectiveness of the price control regime in curbing the price volatility of petroleum products that has eroded Kenya’s competitiveness in regional markets and wrecked household budgets, especially of poor homes.

The Ministry of Energy announced Tuesday that that a litre of diesel will retail at a maximum price of Sh87.45 until January 14—a price that was higher than the previous rate of about Sh85 at pump stations outside the Nairobi’s Central Business District.

A spot-check by the Business Daily showed that most stations have already increased their diesel prices to Sh87 and OilLibya reckon that the impact of the elevated wholesale prices will be felt at the pump in coming days.

It set maximum Kerosene prices at Sh75.83 a litre in Nairobi and Sh78.04 in Kisumu up from about Sh70. Oil dealers have started adjusting their prices upwards with some stations in Nairobi selling the product at Sh75.

But petrol prices that had risen to Sh100 in Nairobi have now receded to Sh94.30 following the government directive.

“We have followed them to the dot,” said David Ohana, the general manager for KenolKobil said on Thursday of the government price list.

Energy analysts say that the government price schedule gives room for the marketers to compensate for the losses in the petrol segment with increments in the diesel and kerosene segment as well as upcountry service stations.

Diesel accounts for about 40 per cent of the petrol products sold in Kenya, according the Petroleum Institute for East Africa (PIEA)—a signal that the price increments will be enough to compensate for losses in the motor petrol that accounts for 15 per cent of the sold products.

Kerosene accounts for about 7.9 per cent of the products.