Keter calls for fair play of oil firms, assures of State support

Tuesday February 2 2016

Energy and Petroleum Cabinet Secretary Charles Keter addresses a news conference in Nyayo House on January 28, 2016. Mr Keter said the ministry was studying the various costs lumped on a litre of fuel with a view to eliminating unnecessary ones. PHOTO | WILLIAM OERI | NATION MEDIA GROUP

Energy and Petroleum Cabinet Secretary Charles Keter addresses a news conference in Nyayo House on January 28, 2016. Mr Keter said the ministry was studying the various costs lumped on a litre of fuel with a view to eliminating unnecessary ones. PHOTO | WILLIAM OERI | NATION MEDIA GROUP 

Energy and Petroleum Cabinet Secretary Charles Keter has told oil marketers to be transparent, even as they sought “protection” from the government, saying they had been accused of fleecing consumers at the pump.

At a luncheon organised by the industry lobby, Petroleum Institute of East Africa (PIEA), on Monday, oil marketers tried to convince the Energy Cabinet secretary that the local pump prices were competitive and among the best in the world.

This comes after both oil dealers and the Energy Regulatory Commission (ERC) have been on the spot for fuel prices that analysts say do not match those on the international scene.

“I want to assure you of my absolute support. I only need honesty and transparency so that together we can move this country forward,” Mr Keter told representatives of oil marketing companies.

In a bid to lower fuel prices, the government has now shifted focus to gross margins allowed to oil marketing companies.

Mr Keter said the ministry was studying the various costs lumped on a litre of fuel with a view to eliminating unnecessary ones through streamlining of operations in the petroleum import and distribution chain.

He specifically pointed out the provision for depot and pipeline losses, calculated as part of distribution costs that the pricing formula relied upon by the ERC that allows as compensation for oil marketing companies involved in importation and retail sales of petroleum products.

“I have checked a lot of issues and I have seen depot and pipeline losses. We cannot always put a figure. I need to know the actual figure,” he said.

'PRICE FIXING'

ERC allows a distribution cost margin of Sh4 per litre on all classes of fuel, which covers losses incurred through transportation of products by pipeline and storage at depots.

Last month, the energy sector regulator reduced the price of diesel and super petrol by less than Sh2, sparking outcry from users, with the Consumers Federation of Kenya (Cofek) threatening to take legal action against ERC, which it accused of engaging in “price fixing” rather than regulating prices of fuel.

Crude prices are at their lowest since 2003, trading at about $30 a barrel.

A steep drop in global oil prices has been experienced since mid-2014, following failure by the Organisation Of Petroleum Exporting Countries (Opec) to adopt a production quota to curb oversupply.

Analysts expect the drop in prices to be sustained this year, supported by increased production from Iran, whose sanctions were lifted recently, and a decline in demand from China following a slowdown in its economic growth.