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Economy

Fuel prices set to be uniform in all towns

Energy regulator has been adjusting fuel prices every month. FILE PHOTO | NMG
Energy regulator has been adjusting fuel prices every month. FILE PHOTO | NMG 

Consumers near Mombasa port city will pay more for fuel as prices in northern Kenya reduce, if a new recommendation is adopted.

The Ministry of Energy is reviewing a proposal to create uniform pump prices across the country to remove disparity in costs in an environment where the government controls petroleum prices.

Consumers in towns near Mombasa pay less for fuel due to lower transport costs between the stations and the port where petrol lands from global refineries.

“It’s only fair to ensure prices are uniform across the country much the same way consumer electricity tariffs are the same, regardless of the transmission costs,” said Energy secretary Charles Keter.

The price equalisation plan, modelled on Ghana’s, is contained in a recent study commissioned by the ministry.

“In the case of Kenya this would mean having a common pipeline tariff applicable to all pricing depots irrespective of distances from Mombasa and equal transport charges from the pricing locations to all consumer destinations across Kenya would be equal,” the study says.

Price regulation

Kenya in 2010 started controlling maximum price of petrol, diesel and kerosene and uses a formula to review pump prices monthly, based on fluctuations in global crude oil prices, freight costs, forex market and tax changes.

Petroleum prices currently vary across Kenya due to transport costs that reflect how far a location is from Mombasa port where imported consignments land and are stored.

Mombasa consumers, therefore, enjoy the lowest retail prices at Sh98.39 per litre for petrol and Sh85.44 for diesel.

Petrol costs a maximum of Sh101.67 a litre in Nairobi while diesel retails at Sh88.71.

Consumers in the lakeside Kisumu city pay Sh103.64 per litre at the petrol pump and Sh90.89 for diesel.

Petrol is most expensive in the northeastern town of Mandera at Sh115.48 a litre, or Sh17 more than in Mombasa, while diesel costs 102.52.

Uniform prices

The uniform prices model, however, comes even as the government has hinted at removing the petroleum price controls.

Oil marketers have since asked the government to retain the controls.

Price equalisation would only work in a regime with controls, since the competition laws discourage price fixing in a free market set up.

Kenya relies on imported petroleum products after it shut down the Mombasa-based refinery in September 2013.

The uniform prices plan will smooth out the variance across the country by making Mombasa consumers pay higher and hand Mandera motorists lower bills.

Mr Keter says the government is moving to decentralise the petroleum pipeline to counties, expected to lower pump prices in far-flung regions that rely on trucks and speed up fuel supply.

Currently, the Energy ministry awards one oil marketer the right to import petroleum in bulk every month on behalf of the entire industry through the open tender system (OTS).

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