State punishes fuel marketers for exporting oil amid crisis

Eldoret fuel

People queuing with jerrycans at a petrol station in Eldoret town, Uasin Gishu County. PHOTO | JARED NYATAYA | NMG

Oil marketers that increased fuel exports from last month will have their allocations slashed and handed over to dealers who recorded increased sales locally in a bid to ease the ongoing fuel shortage.

Epra said the changes will be effected in the next three import cycles as the State moves in to punish dealers behind the ongoing nationwide shortage of diesel and petrol.

The Energy and Petroleum Regulatory Authority (EPRA) says investigations have revealed that several dealers gave priority to the export market in quiet protests over delayed compensation from the State for the unchanged prices.

Oil marketers traditionally allocate 65 percent of their fuel imports to the local market and 35 percent to the transit market.

A number of the marketers increased the share of fuel they sell to the neighbouring countries to over 60 percent to ease their cash crunch given that they are paid instantly unlike in Kenya where the State compensation delays.

The shortage has crippled some transport firms and opened an avenue for some dealers to raise prices above the caps set by the EPRA with a litre of petrol retailing at Sh200 a litre in some parts of Kenya.

“EPRA hereby recommends that in the allocation of capacity for the next three import cycles, a key consideration should be given to the reduction of capacity share for all OMCs who increased their transit volumes over and above their normal quota during the supply crisis period,” says Mr Kamau in the letter.

Diesel and petrol outages first hit the country in the last week of March but eased after the government partly paid the arrears to reduce their cash flows.

The government says it owes the oil companies Sh13 billion and on April 4 released Sh8.2 billion to the dealers who claim to be owed more than Sh20 billion.

Several bus companies and cargo transporters have grounded their fleet for lack of fuel while private motorists are also struggling to get the precious commodity, triggering panic buying that saw dealers hike prices and others limit the amount of fuel being sold per motorist.

An executive of one of the local oil marketers says that the move will ease the local supply hitches but is likely to expose the dealers to legal suits for breaching the volumes they are supposed to supply to the transit market.

“We are in a supply-constrained ecosystem. Squeezing the dealers, you will have more products for the local market.

“But on the other side, these dealers have contracts over the amount they should supply the respective countries what happens to these contracts?” posed the executive.

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