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Economy

Petrol users to pay oil marketers Sh945m

Energy Regulatory Commission acting director-general Pavel Oimeke. FILE PHOTO | NMG
Energy Regulatory Commission acting director-general Pavel Oimeke. FILE PHOTO | NMG 

Petrol users will from midnight start paying Sh945 million compensation to oil marketers who incurred costs that were not passed on to customers.

The compensation is meant to cover oil companies for paying the taxman additional road maintenance levy two years ago but the cost was not passed to consumers during the monthly reviews.

The oil companies are also seeking to recover losses that come with converting imported super petrol cargo from metric tonnes, the international standard unit, to litres at the local pump.

The Sh945 million compensation burden will see consumers pay an additional Sh0.69 per litre of petrol which will be staggered over the next six months, excluding factors like global crude prices and foreign exchange fluctuations.

Diesel users will not be affected by the compensation costs.

“The cost recovery is expected in subsequent months,” said Energy Regulatory Commission acting director-general Pavel Oimeke.

The energy regulator imposes price controls for the petroleum market to shield consumers from cartel-like behaviour which in the past resulted in sky-high prices.

The metric tonnes to litres conversion losses arise when importers buy petrol cargo weighing more (density) but with less volume, translating to less litres and exposing marketers to losses in an environment where fuel prices are controlled monthly.

This challenge prompted the ERC in April 2015 to introduce an escalation/de-escalation factor in the monthly review of petrol prices to cushion dealers. But the April 2015 fuel cargo were not covered, exposing them to the losses.

This is the cost consumers will pay starting midnight at Sh0.42 per litre of petrol for the next six months, or Sh348 million based on Kenya’s average monthly petrol consumption of 138 million litres.

Consumers will also pay an additional Sh0.2699 per litre of petrol or Sh597 million after the ERC failed to include adjustments to the fuel levy in July 2015 and June 2016 in the monthly consumer prices.

In 2015, the Treasury increased the levy from Sh9 to Sh12 per litre of petrol and diesel and made further adjustments to Sh18 last year.

ERC delayed by a month in including the additional levies in monthly fuel prices.

The two bills add up to Sh945 million.

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