Motorists see red as regulator cuts oil price by less than Sh2

Thursday January 14 2016

A petrol attendant fuels a customer's vehicle. Super petrol will now retail at Sh88.64 per litre in Nairobi, while diesel and kerosene sell at Sh76.70 and Sh46.13 per litre respectively. PHOTO | JOSEPH KANYI | NATION MEDIA GROUP

A petrol attendant fuels a customer's vehicle. Super petrol will now retail at Sh88.64 per litre in Nairobi, while diesel and kerosene sell at Sh76.70 and Sh46.13 per litre respectively. PHOTO | JOSEPH KANYI | NATION MEDIA GROUP 

By IMMACULATE KARAMBU
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Motorists’ hopes for cheap fuel were Thursday dashed after the Energy Regulatory Commission (ERC) announced a marginal decrease sparking claims that it is helping oil marketers to fleece Kenyans.

The ERC reduced the price of super petrol by Sh1.42 while that of diesel went down by Sh1.81 per litre, citing a drop in the cost of importing the products.

The marginal decline is despite oil prices being on free fall with Tuesday price of US benchmark crude West Texas Intermediate (WTI) falling $29.93 a barrel, a 12 years low.

The Consumers Federation of Kenya (Cofek) has rejected the new prices and accused ERC of “price fixing” which it says is contrary to its mandate of setting the costs.

“It’s obvious that there are people within ERC who are defrauding consumers by not willing to pass the full benefits of the reduction in oil prices globally. We will write to the regulator to show cause why we should not take legal action against it for engaging in price fixing similar to what cartels would do,” said Mr Stephen Mutoro, Cofek secretary general in a telephone interview.

Since the last price review, the mean exchange rate of the shilling against the dollar has remained relatively stable, depreciating by only 0.03 per cent while the price of crude oil has been on a decline.

The regulator has often been on the spot for what many have viewed as price reviews that have failed to ensure that consumers fully enjoy the benefit of cheap global oil prices that have fallen by over 60 per cent.

“The driver of this decrease was as a result of the average landed cost of imported super petrol falling by 4.32 per cent. Similarly, the average landed cost of imported diesel decreased by 7.63 per cent,” said ERC in a statement on Thursday.

ERC CRITICISED

Last year, the World Bank criticised ERC’s price-setting formula saying that it denies consumers full benefits of the plummeting crude.

“Declining oil prices should lower prices and boost aggregate demand. Declining oil prices will boost the domestic economy through both first and second round effects. There is a threat that most of these benefits may not be passed on to consumers,” said the World Bank in its Kenya Economic Update report released at the time.

ERC said the formula takes into account a month’s lag between placing an order for products and their actual receipt at local depots and also government taxes and levies going as high as Sh48 per litre, which remain unchanged during the review.

The Excise duty Act, which came into effect December 1, increased the amount of tax on diesel by Sh2.06 to Sh10.30 per litre.

Super petrol will now retail at Sh88.64 per litre in Nairobi, while diesel and kerosene sell at Sh76.70 and Sh46.13 per litre respectively.

Mombasa retains the cheapest prices at Sh85.34 per litre of super petrol and Sh73.43 and Sh43.44 per litre of diesel and kerosene respectively.