Oil marketers get reduced margins for diesel supply


An attendant fuels a car at a Rubis station on Koinange Street, Nairobi on January 15, 2023. PHOTO | DENNIS ONSONGO | NMG

The State has partially reinstated supplier margins for oil marketers on diesel prices more than a year after they were removed in a bid to lower the cost of fuel.

The pricing schedule published by the Energy and Petroleum Regulatory Authority (Epra) shows compensation of Sh2.54 per litre of diesel in the monthly review lapsing March 14.

Supplier margins — meant to compensate oil firms for their investments in their retail footprint and operating costs — were removed in the January to February review last year as the State sought to ease the impact of the global rally in crude costs.

Oil dealers are compensated at the rate of Sh12.39 per litre of petrol and Sh12.36 per litre of kerosene.

They were previously also paid Sh12.36 per litre of diesel, with the compensation now reinstated at a lower rate of Sh2.54 per litre.

The move looks set to slightly ease the cash crunch facing oil marketers in the wake of delayed compensation from the State for keeping pump prices low.

Reinstatement of the margins comes at a time when global prices of crude have dropped to the lowest since April last year setting the stage for the continued drop in pump prices.

The Epra kept pump prices unchanged for the third month in a row with a litre of super retailing at Sh177.30 and Sh162 for diesel in the monthly review that will lapse on March 14.

The State fully reinstated supplier margins for super in the monthly review for September to October last year.

Global prices of crude have maintained a steady drop to $90.90 per barrel for the fuel cargo that Kenya imported for this month’s review, from a high of $117.53 per barrel in August last year.

Diesel remains the most used fuel in Kenya highlighting why the partial reinstatement per litre of the commodity is significant to oil dealers based on the volumes sold.

Removal of the supplier margins a year ago added to the financial woes besides the delayed compensation that hurt their cash flows.

The State owes oil dealers billions of shillings for keeping pump prices unchanged for most of the period from April 2021, when crude costs of crude rose sharply.

A sustained drop in the global prices of crude will offer the State headroom to progressively increase the diesel supplier margins.

The margins for kerosene are yet to be partially reinstated.

American investment bank Goldman Sachs projects Brent to average $92 a barrel this year, less than their previous level of $98.

Goldman Sachs attributes the projected low prices to the high-interest rates that have weighed on economic growth and fuel demand, adding that investors are not overly concerned about a drastic drop in oil supply from Russia due to sanctions.

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