Motorists will pay an extra Sh7.80 per litre of petrol as the energy regulator revises upwards the margins offered to oil marketers, triggering fears that the review could fuel inflation.
The Energy and Petroleum Regulatory Authority (Epra) on Wednesday said it plans to increase fuel retailers’ margins by Sh4.59 and the finance surcharge by Sh0.69 per litre, making oil marketers the biggest beneficiaries of the price review.
The margins cater to oil dealers’ costs and profits and are part of the items that make up the monthly review of pump prices.
Wholesalers’ margins on a litre of petrol will also be increased by Sh1.64, transport margins up by Sh0.64 and tariffs on secondary storage will increase by Sh0.235.
This would increase the oil marketers’ margin from the current Sh12.36 per litre, the first review since 2018.
It could trigger a fresh increase in the price of fuel, marking a blow to consumers plagued by costly petrol and diesel prices in the aftermath of tax increases on the products.
The review will see marketers’ margins and transport costs increase by Sh7.75 per litre for diesel and Sh7.67 for kerosene.
Fuel prices in Nairobi are retailing at Sh176.58 per litre of petrol, while diesel and kerosene are selling at Sh167.06 and Sh151.39 per litre respectively.
Fuel prices have a major impact on inflation in Kenya, which relies heavily on diesel for transport, power generation and agriculture, while kerosene is used in many households for cooking and lighting.
The tariff review follows a study by consultants, Kurrent Technologies and Channoil Consulting Ltd, which proposed an increase in margins offered to oil marketing companies (OMC).
Epra defended the price adjustments, arguing that they are key to keeping oil dealers and transporters in business as squeezed margins push their firms into the red.
 “Transporters have not had an increase since 2010, many of them have shut down. If you own a truck and you’ve signed a contract with an OMC, the OMC can only compensate you on what Epra has approved and the last time Epra set a price for transport was in 2010,” said Epra’s Director-General Daniel Kiptoo.
He reckoned that small oil marketers and transporters were on the verge of closing shop.
On Wednesday, oil marketer Ola Energy, announced job cuts amid difficult times that have forced it to restructure its operations.
The company said the restructuring process was aimed at containing its operating costs, resulting in some workers being declared redundant.
“Due to the foregoing challenges, OLA Energy Kenya is finding it difficult to sustain its current fixed costs. It is, therefore, with deep regret, that we need to implement a redundancy programme,” Ola said in a statement on Wednesday.
The new tariffs could come into effect as early as Friday, when Epra announces pump prices for the period from March 15 to April 14.
Transporters have been operating on a margin of Sh0.54 for a litre of petrol they transport for distances below 40km and Sh11.98 for a cubic metre of petrol they transport per kilometre, for distances above 40km.
This will now rise to Sh1.18 for a litre of petrol for the under 40km and Sh19.28 for each cubic metre of petrol they transport each kilometre for long distances.
Mr Kiptoo said that high costs have forced some small OMCs to consider the sale of their businesses to large operators, justifying the price increase as what would cover for inflation and other economic impacts.
Epra plans to raise the retail investments margin from Sh4.05 to Sh6.17 for a litre of petrol, and retail operations margin from Sh6.61 to Sh4.14.
Wholesale margins will increase from Sh3.05 to Sh4.69 per litre of petrol, while oil marketers will now get Sh1.18 as compensation for every litre of petrol they hold in compliance with minimum operating stock requirements, up from the current Sh0.49.
Oil marketers are required to keep 15 days' worth of fuel in stock to cover unforeseen disruptions in the supply chain, and consumers pay for the value of the fuel they hold at the pump.
“When we reviewed the rate in 2018, the cost of fuel was about Sh70-Sh80/litre which has gone up to about Sh170-Sh180/litre. The value of that stock compared to 2018 has gone up. When you keep stock then it means you are tying your capital,” said Epra’s senior pricing analyst Leonard Yegon.
Epra plans to introduce the new charges when pump prices are falling, to ease pressure on motorists and inflation.
 “We are looking for a mechanism where we implement this report in phases. We want to time it at a point when it will not impact the consumer negatively. When we are having petroleum prices come down.
“If you look at the prices for January, February and March, we are seeing international prices starting to come down. We see an opportunity where we will be able to implement these recommendations without necessarily increasing pump prices,” he said.
