Economy

Oil shortage hits motorists as fresh supplies delayed

A shortage of fuel hit numerous outlets on Monday with the dealers saying that they did not stock up adequately ahead of the monthly price review announced on Saturday, leaving the major oil companies with expensive products. Photo/REUTERS
A shortage of fuel hit numerous outlets on Monday with the dealers saying that they did not stock up adequately ahead of the monthly price review announced on Saturday, leaving the major oil companies with expensive products. Photo/REUTERS  

A shortage of fuel hit numerous outlets on Monday with the dealers saying that they did not stock up adequately ahead of the monthly price review announced on Saturday, leaving the major oil companies with expensive products.

Anticipation of lower prices had started earlier when the Energy Regulatory Commission (ERC) forecast that the prices would drop by between Sh3.50 and Sh7 a litre with diesel and kerosene consumers expected to have been the key winners.
“Speculation by ERC has led to abnormal behaviour by consumers and dealers. They are distorting the market,” said Kenya Shell country manager Jimmy Mugerwa.

The final review saw petrol emerge with the highest reduction of Sh7.18 a litre while diesel dropped by Sh3.08 a litre and kerosene by Sh3.63 a litre.

Leading marketers said they were holding one week of stock after dealers failed to buy the expensive fuel.

“The Sh7 per litre drop is too stiff. ERC failed to manage expectations from their forecasts and the actual finalised price calculations,” Mr Mugerwa said. Orders were understood to have resumed on Monday.

“The orders have resumed because the prices are now known. Marketers may incur losses due to demurrage since the system is clogged up with material that is yet to be evacuated ,” said Mr Peter Njeru, managing director Riva Petroleum, a midsized dealer based in Nakuru.

According to Millennium Star, an independent retailer in Nairobi, most dealers bought limited stock last week to avoid selling at negative margins.

“I bought super petrol on Saturday at Sh115 before the new prices were announced. The wholesale prices have now dropped to the same level as the ERC”s maximum recommended retail prices of Sh111.9.

We were selling at a loss but the expensive product is finished,” said Millenium Star proprietor Venancio Kariuki.

Yaseen Hussein, a director at Lunar Petroleum said that dealers were waiting to buy at lower prices based on the prior information from the ERC while consumers accused the regulator of not doing enough to enhance efficiency along the value chain.

“The focus of ERC should be regulating the environment and not indicators like pricing,” said consumer federation of Kenya chief executive Stephen Mutoro.

ERC’s formula puts the maximum allowable retail margins on all fuels at Sh3 per litre and company margin at Sh9.62, with the Sh0.62 introduced in November to cater for increased cost of financing.

zsambu@ke.nationmedia.com