Price war: The truth about fuel shortage

Oil companies may be hoarding fuel to create an artificial shortage of the essential commodity, our investigations revealed on Sunday.

The Nation learnt that the companies had deliberately refused to collect more supplies at their respective depots in Nairobi for onward transmission to the petrol stations, despite the availability of the commodity in plenty.

Multiple interviews with industry insiders showed that marketers are focusing the sale of the fuel to neighbouring countries within the region to create an artificial shortage for them to be allowed to increase prices.

The prices in neighbouring countries give the companies higher profits than in Kenya where the Government is spearheading a move to establish a price control mechanism, the Nation learnt.

The proposal, industry insiders say, has unsettled petrol companies who prefer to set the prices. The Government has published a proposed formula for determining prices following a reluctance by petrol companies to reduce prices in line with global prices, which have fallen from an all-time high of $147 a barrel to about $37 currently.

The Government then invited petrol companies and other industry players to give their input before the final proposal is taken to Parliament for passage into law.

The Nation also established that no fuel shortages have been reported in Uganda, Southern Sudan or Rwanda
Documents in our possession indicate that about 4.2 million litres of premium petrol had been pumped to seven petroleum companies within the last four days.

Kenya Pipeline Company also pumped 261,000 of regular, 563,000 litres of kerosine, 6.1 million litres of diesel, 1.3 million and 5.8 million litres of Jet fuel to Moi and Jomo Kenyatta International airports, respectively, during this period.

By Sunday evening, KPC received an additional 4.2 million litres of premium petrol and 15 million litres of diesel from their Mombasa depot to be distributed to various parts of the country, according to the document.

The seven companies include Chevron, OilLybia, Kobil, Shell, Total, Nock, and Oilcom. The details emerged on a day that marketers, through their umbrella body the Petroleum Institute of East Africa, blamed the Kenya Petroleum Refineries, KPC, Kenya Revenue Authority, importers and Kenya Power and Lighting Corporation for the “shortages.”

Crude oil

The inability by the refinery to convert crude oil into sufficient quantities especially of premium gasoline was frustrating, said Petroleum Institute of East Africa general manager George Wachira.

“With a refinery in an urgent need of an upgrade, this will continue to be an expensive problem both to the economy and the consumer,” said Mr Wachira in an article published in the Sunday Nation.

“Power fluctuations and outages have also consistently interfered with the ability of the refinery to meet its production targets.”

When the Nation called him to respond to reports that petrol companies were creating an artificial shortage, his phone went unanswered and neither did he respond to the inquiries sent through the text message service.

Mr Wachira in his article apportions a share of blame to KPC over an upgrading programme. “KPC commissioned a new set of pumps at a time when the country was low in stocks. Commissioning a new pumping system always has teething problems.

“At a supply meeting in late November, marketers expected the system to stabilise within one month,” Mr Wachira wrote.

False hope

“However, KPC may have given people false hope with the timing of the commissioning ceremony which has not been made smoother by the quality of power supply.”

That coupled with difficult tax payment procedures may have slowed down the movement of the commodity by road, said Mr Wachira.

Energy Assistant Minister Charles Keter told the Nation that KPC had delivered its part of the bargain.

Mr Keter said the fuel in various depots was enough to last for a week and wondered why the oil firms were not taking the commodity to their petrol stations. In addition, he said KPC was pumping fuel everyday as usual.

“We have enough fuel in the depots and we want to know why the companies are not picking the products,” the assistant minister said.

Mr Keter asked the firms to explain to Kenyans why there was no fuel at their stations when there was plenty at the depot.

He said the Government would not allow economic sabotage now that it had asked the companies to reduce the prices to be in line with the world prices.

“We will not allow any price increases because it is very clear that the crude oil prices is at its lowest,” he told the Nation by telephone.

The Nation learnt that a further 15.8 more litres of diesel and 6.4 million litres of kerosene is expected to be supplied to the KPC Nairobi depot from Mombasa between today and Thursday.

According to the document, Nairobi had 10.1 million litres of premium petrol in storage tanks ready for consumption as at yesterday morning.

Others were 1 million litres (regular), 1.9 million litres (kerosene), 909,000 (diesel) and 18.1 million litres (Jet fuel).

Eldoret had 1.8 million litres (premium), 634,000 litres (regular), 1.4 million litres (kerosene) and 3.4 million litres (diesel), while Kisumu had 1.8 million litres (premium), 1.2 million litres (regular), 1.2 million litres (kerosene), 2 million litres (diesel) and 1.6 million litres Jet fuel.

Nakuru on the other hand had 1.1 million litres (premium), 1 million (regular), 1.6 million (kerosene), and 153,000 litres of diesel pumpable stock in tanks ready for consumption.

“Owing to this, we still wonder why there is this artificial shortage of fuel,” said the source.

The country has over the last few days witnessed an increase in fuel prices by at least Sh2 created by the artificial shortage of the essential commodity.

There were fears that those who have travelled up country for the Christmas festivities may get stranded as the fuel shortage continued to spread in the country.

On Sunday, a source who declined to be named, said KPC pumps at least 540,000 litres of fuel per hour in a bid to meet the rising demand for the commodity by Kenyans.

The source asked: “If there is indeed a shortage of fuel in the country, why hasn’t it spread to other parts of the region?

“These oil marketers must, therefore, come clean and explain to Kenyans where this artificial shortage is from and why it had not spread to the neighbouring countries who depend on our supplies,” said the source.

“We pump at least 540,000 litres of fuel per hour everyday and this is going on even now. These people must come clean and tell us what is going on.”

A spot check by the Nation at the depots of the various oil marketing companies revealed that all of them were closed and were not allowing oil tankers to load more fuel stocks despite the ‘shortage’.

In Kisumu, officials from KPC said they had adequate fuel supply in its depot and blamed oil marketers for the acute shortage of petrol in parts of Western Kenya.

Mr Joshua Nyatebe, the KPC Kisumu depot manger, said they loaded tanks until late on Saturday and could not understand why there was a shortage of fuel in the region.

“We loaded supplies that were sufficient for the local market at the weekend and even extended the process until late on Saturday,” Mr Nyatebe said.

However our survey revealed that motorists who visited most petrol stations were turned away. Total, Kenol, Kobil, Shell, National stations had only diesel.

There were long queues of cars at HASS petrol station on Kisumu-Kakamega road and at OiLibya stations, which had fuel.

Raised fares

Meanwhile, hundreds of travellers werestranded on Sundayafter matatu operators in most parts of Western Kenya raised fares as fuel shortage continued to bite in the region.

Oil dealers in the region have raised prices of super petrol and diesel by two shillings following shortage of the two commodities for the past one week.

In Mt Kenya region, fuel shortage persisted on Sunday even as several petrol stations received fresh supplies.

Only three petrol stations in Nyeri Town had fresh supply and motorists were queuing to fill their tanks. National Oil received fresh supply on Saturday evening and the supervisor, Ms Eunice Mwangi, said it would last only for a day.

Additional reporting by Dan Obiero, Henry Andanje, Barnabas Bii, Muchiri Gitonga, Mwangi Ndirangu and Charles Wanyoro