Kenyans paying more for fuel, says Kippra report

What you need to know:

  • The Kenya Institute for Public Policy Research and Analysis (Kippra) faults the regulator, in a report set to be launched today, over failure to remove a cost item associated with Kenya’s only refinery despite its closure in September 2013.
  • The energy regulator, however, sought to deflect blame, saying it reduced the refinery cost component to zero on September 1, 2013, after the refinery shut down but left the general formula intact.

A government-backed policy body has asked the Energy Regulatory Commission (ERC) to review the formula it uses to set petroleum prices at the pump, saying some cost components are unfairly burdening consumers.

The Kenya Institute for Public Policy Research and Analysis (Kippra) faults the regulator, in a report set to be launched today, over failure to remove a cost item associated with Kenya’s only refinery despite its closure in September 2013.

The think-tank reckons that leaving the refinery cost intact amounts to unexplained burden on motorists.

“In terms of petroleum consumption, the formula used to calculate prices has not been reviewed since it was enacted (2006),” Kippra says in the report.

“It is important to review this because aspects such as charges for refining remain even after the only refinery was closed.”

The energy regulator, however, sought to deflect blame, saying it reduced the refinery cost component to zero on September 1, 2013, after the refinery shut down but left the general formula intact.

The refinery levy stood at Sh286.8 ($2.84) per barrel of petroleum. A barrel is equivalent to 159 litres of petroleum, translating the refinery levy to about Sh1.80 per litre of fuel. The levy was imposed on oil marketers who then passed it to consumers.

“We zeroed the charge but left the formula unchanged since there is a window for Kenya to build a new refinery in Lamu, which will make the formula still applicable in future,” said Mr Edward Kinyua, acting director for petroleum at the ERC.

But Kippra’s policy analyst, Ms Hellen Osiro, insisted that consumers were still paying the refinery charges in pump prices.

She said the energy regulator had not presented any formal documents such as a gazette notice or policy brief to indicate the charges ceased to apply three years ago.

The ERC sets the prices of petroleum products every month in line with global crude oil prices and fiscal policy changes.

Kenyan motorists pay multiple taxes and levies at the pump.

Taxes account for more than 40 per cent the cost of each litre of petroleum at the pump.