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No respite for consumers as fuel prices fall

Fuel
Since November 2018 when the price of petrol hit a peak of Sh118.11 per litre, motorists have enjoyed a gradual reduction which hit Sh18.2 lower this week. FILE PHOTO | NMG 

Have you felt the relief from cheaper petrol and diesel? That is the big question that will remain on the minds of many consumers after petroleum pump prices dropped for the fourth month in a row last week.

In September 2018 when the Energy Regulatory Commission effected the controversial value added tax on petrol, diesel and kerosene, stakeholders including transporters and manufacturers protested, asking consumers to brace for tough times.

They were right. Transport and energy costs account for a huge portion in the cost of production and any movement in the two costs sends shock waves right to the shelves where consumers feel the effect of higher prices.

There has, however, been silence since the pump prices began to drop. Not even the Matatu Owners Association has come to announce a drop in fare prices in what its chairman Samuel Kimutai attributes to a “very meagre” drop in fuel prices.

“Matatu fares are not just determined by petrol prices. We have tyre prices, maintenance costs and even a bigger threat, corruption. If you try to translate the drop in diesel prices in the last four months then fare should have dropped by Sh1 which no one will even feel,” Mr Kimutai told the Sunday Nation.

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His line of argument is based on the fact that the fluctuating nature of matatu fares especially within Nairobi driven by demand makes it hard to increase it in the long-term.

Mr Kimutai’s association had projected that fares would increase between Sh10 and Sh20 in August 2018, a statement he now says was just a ‘threat which never happened’.

Friday’s announcement by ERC that fuel prices had hit a new low with a litre of super petrol dropping Sh4.12 cheaper to sell at 100.09, while a similar volume of diesel becoming Sh6.28 cheaper to retail at Sh95.96 would ordinarily be good news to consumers but the pass down is seemingly the hard nut to crack.

Stakeholders even believe Kenyans should expect more relief at the pump from other falling costs like demurrage charges after Kenya Pipeline Corporation expanded its storage capacity.

KPC acting managing director Hudson Andambi on Thursday said the expanded storage capacity in the Nairobi main depot has almost halved the demurrage costs associated with delayed discharge of imported fuel from the ships in the last six months.

Mr Andambi, who was speaking during the launch of the 2019 Energy Journalism Excellence Awards (EJEA), said more relief is expected as the new Mombasa-Nairobi pipeline becomes the main transit method for fuel from the Coast.

“In June last year, just before the tanks became operational, the country’s demurrage costs were at a monthly average of Sh154 million but in January, this monthly average has significantly come down to Sh78 million,” Mr Andambi said.

Tanker owners usually charge marketers demurrage penalty which adds to about Sh1 per litre at the pump due to insufficient storage at the port of Mombasa where vessels are forced to wait to discharge fuel into KPC’s system for onwards piping to Nairobi and beyond.

The new tanks combined with the Sh48 billion Line 5 are expected to adequately serve Kenya and the region’s petroleum demand projected to be 11.4 billion litres in 2020 and 24.5 billion litres in 2044, according to KPC.

Since November 2018 when the price of petrol hit a peak of Sh118.11 per litre, motorists have enjoyed a gradual reduction which hit Sh18.2 lower this week. A litre of diesel which is used to power generators and heavy commercial vehicles has fallen Sh16.87 over the same period.

The failure to have these benefits translate to the consumers who foot the bill of some of the multibillion projects aimed at reducing the cost of energy make the ERC reliefs less important to the consumers who remain burdened by a higher cost of living.

Kenya remains a free-market economy where demand and supply play out in the market save for fuel which ERC began regulating in December 2010.

Mr Andambi however believes that such investments like the completion of the 20-inch pipeline from Mombasa to Nairobi have associated benefits when trucks which damage roads and cause accidents with strains on the health sector.

“The line is also expected to reduce road maintenance costs, tanker accidents and associated safety hazards given the hundreds of the new facility have removed from the roads, “the KPC boss said.

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