Oil majors have struck a deal to sell 20 million litres of petrol and diesel to small dealers at ‘reasonable prices’ in a move aimed at easing supply hitches that have hit parts of rural Kenya.
Petroleum Principal Secretary Andrew Kamau told the Business Daily that big oil marketers will release the stocks in the coming days and at prices lower than the retail prices to ensure small marketers get margins on their sales.
Small dealers who control the rural economy have for the past few weeks been locked out of supplies by the big oil majors who have been offering them the commodity at pump prices, pushing the independent operators out of business due to lack of margins. This has led to a shortage of fuel in Western, Rift Valley, and other parts of rural Kenya and crippled transport and businesses.
“We agreed that in order to correct the fuel supply hitches that have affected the country for the past few weeks, 20 million litres be made available to the non-franchised petroleum retailers,” Petroleum Outlets Association of Kenya said in a statement.
“Oil marketers agreed to sell fuel to the independents at reasonable prices.”
Small marketers who control 40 percent of the market do not import and buy supplies from the big players who have recently cut supplies to the dealers besides selling the commodity at pump prices.
The multinationals are not bound by law to resell fuel to the small dealers at wholesale prices, a loophole that has left the independent dealers exposed and dried up their cash flows because they cannot sell fuel above the retail prices published by Epra in the monthly review.
The Petroleum Act of 2019 imposes a fine of Sh10 million or five years in jail for dealers who sell fuel above the price set by the regulator.
Small dealers have for the past few weeks sought Epra to intervene and set wholesale prices in a bid to help them get petrol, diesel, and kerosene supplies from the majors.
But the regulator declined to set the wholesale prices and instead left the oil majors and small dealers to negotiate favourable prices.