Fuel marketers ignore ERC on new price caps

Some fuel dealers in parts of western Kenya have broken the price ceilings set by the energy sector regulator last weekend, spoiling for a fight over trading margins.

The independent marketers face up to Sh1 million fines stipulated under the law, but they say the recommended prices threaten the survival of their businesses.

An Energy Regulatory Commission (ERC) official said two cases of fuel stations posting higher than recommended prices had been reported in western Kenya.

“We’ve received two cases from western Kenya and have asked the Provincial Administration to take up the matter,” said a top ERC official on phone.

The regulator on Saturday, cut the maximum price of super petrol in Nairobi to Sh108.39 a litre from Sh117.67, while reducing that of diesel to Sh97.50 a litre from Sh105.51.

The price of kerosene was slashed to Sh76.20 a litre, which dealers say is less than the Sh77 a litre incurred in transporting the fuel to the filling station.
Independent dealers, however, insist they had complied with the directive despite its implication on their businesses.

Kerosene is selling at Sh75 a litre at the depot while ERC has recommended Sh76.2 a litre.

Transportation costs us Sh2 a litre per kilometre and wipes out the margin,” said Western Kenya Independent Petroleum Dealers Association chairman Hezekiah Kosgei. He said the dealers should have a mark up of Sh5 a litre to stay afloat.

Major marketers and dealers in Nairobi said the price review left them with expensive stocks.

“We had stocked a lot of products because we were not expecting a high margin drop. ERC is compelling us to sell at a loss,” said Millennium Star director Venancio Kariuki.

OilLibya managing director Rida Elamir said: “The drop in prices was much higher than what we expected.”

Dealers said shortage of petrol and kerosene following the price review had been caused by discharge constraints and failure by the refinery to release additional supplies.

Daily stock reports provided by Kenya Pipeline Company show that stocks of super will last two days, diesel eight days and kerosene 12 days.
“The stocks position is healthy. Reports of shortage is a logistics issue,” the ERC official said.

zsambu@ke.nationmedia.com