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Fuel marketers accuse ERC of distorting market

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ERC chief executive Kaburu Mwirichia (right) and senior manager Linus Gitonga address the press. A petroleum industry lobby has clashed with the sector ERC over announcements of price changes before the monthly review is done, saying this was likely to cause market distortions. FILE

A petroleum industry lobby has clashed with the sector regulator over announcements of price changes before the monthly review is done, saying this was likely to cause market distortions.

The Petroleum Institute of East Africa (PIEA) said the forecasts could see suppliers hoard products if prices are projected to rise or consumers delay purchases when prices are forecast to fall.

“We advise that the regulator take caution in making provisional petroleum price announcements in advance and instead announce the said prices on the 15th day of the month as stipulated in the relevant regulations,” said Wanjiku Manyara, PIEA general manager.

Energy permanent secretary Patrick Nyoike last month indicated prices for petrol, diesel and kerosene would fall within a certain range without committing itself to the actual reduction.

The Energy Regulatory Commission did the same last Saturday, one week before the monthly review.

Previously, one of the oil marketers was forecasting price movements, notably when it was bringing the monthly cargo in an apparent bid to talk up the prices.

At the weekend, the energy sector regulator said provisional calculations showed that prices of Super Petrol were expected to drop by between Sh3.50 and 4.50 a litre and those of kerosene and diesel by between Sh6.00 and Sh7 per litre in that order.

In December last year, Mr Nyoike said that fuel consumers should expect to see price drop at the pump if the shilling kept appreciating and international prices remained stable.

Ms Manyara yesterday said that retailers of petroleum products would take measures to exploit expected movements in prices for gain.

“This will prevent undue decisions being made by retailers who would not want to end up with expensive stock with imminent price reductions or hoarding when prices are predicted to increase, thereby impeding security of supply,” she said.

Fuel prices are now expected to fall for the second consecutive month after going up over a period of seven months last year, driving up the cost of living.

At the end of last year, the civil society threatened general strikes to pressure the Government to reduce the cost of fuel.

Manufacturers and transporters have blamed the high fuel prices for high charges that have pushed the cost of living.

The ERC uses a formula that puts the maximum allowable retail margins on all fuels at Sh3 per litre.

Taxes constitute Sh30 per litre for super petrol while infrastructure services cost an estimated Sh5 per litre of petrol.

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