Why cheap oil remains a pipe dream in Kenya
Vivo Energy managing director Polycarp Igathe speaks during the launch of Shell FuelSave Unleaded and Shell FuelSave Diesel at The Stanley Hotel in Nairobi on June 25, 2014. Vivo Energy, Gapco and Mogas emerged the winners in an open tender awarded on December 18, 2014 to import a combined 435,111 tonnes of super petrol and diesel. PHOTO | SALATON NJAU |
What you need to know:
- Vivo Energy, Gapco and Mogas emerged the winners in an open tender awarded on Thursday last week to import a combined 435,111 tonnes of super petrol and diesel.
- The new rules, set to be adopted at the beginning of next year, will see the level of sulphur content in fuels sold in the region drop to 50 and 150 parts per million (a measure used to determine the level of sulphur) for diesel and super petrol respectively.
- According to the Energy ministry, the difference in price for the fuel stocks will not reverse the trend in pump prices for the time the crude prices will be on the decline.
Consumers could miss out on the benefits of falling global crude oil prices after three marketing companies were cleared to import fuel products at almost double the cost of stocks whose price was announced mid-month.
Vivo Energy, Gapco and Mogas emerged the winners in an open tender awarded on Thursday last week to import a combined 435,111 tonnes of super petrol and diesel.
The supplies, meant to be delivered in January, will cost $38 per tonne, up from $19.5 per tonne sourced in October and which is currently on sale.
The new rates are said to be driven by the need for Kenya to comply with new guidelines that require East African countries to market fuels with low sulphur content.
SULPHUR CONTENT TO DROP
Mr Joseph Wafula, a senior petroleum economist at the Ministry of Energy and Petroleum, said in a telephone interview: “There are few refineries in the world that process the kind of fuel that meets the new rules on sulphur content.
Similarly, few ships that carry that type of fuel are available. The price difference has been brought about by these factors but we hope that as we carry out more tenders in future, market conditions will open up to allow us to align ourselves to better prices.”
The new rules, set to be adopted at the beginning of next year, will see the level of sulphur content in fuels sold in the region drop to 50 and 150 parts per million (a measure used to determine the level of sulphur) for diesel and super petrol respectively.
FALLEN PRICES
The level of sulphur content in locally sold fuel is currently estimated to be 500 parts per million.
Global crude oil prices have fallen by 50 per cent to about $60 a barrel but this is yet to translate to lower prices in Kenya with the marginal drop blamed on the sourcing and weakening of the shilling to the dollar.
Oil cartel Opec has said it will not cut oil production even if the price drops to $20 a barrel.
Mid this month, Energy Regulator announced a single digit drop with kerosene price falling by Sh4.94 per litre, super petrol by Sh4.79 per litre, and diesel by Sh3.67 per litre.
According to the Energy ministry, the difference in price for the fuel stocks will not reverse the trend in pump prices for the time the crude prices will be on the decline.
PUMP PRICES
The Energy Regulatory Commission, which sets maximum fuel prices every month, said it would study the cost variation before it is considered in determination of pump prices.
“We will scrutinise the price differences to ensure that they are valid before incorporating them in setting the price of fuel,” ERC director general Joseph Ng’ang’a said.
The country currently relies on imported refined petroleum products since the closure of the Kenya Petroleum Refineries Limited in September last year.
In addition to the price of crude oil, the cost of imported fuel products is also influenced by the refining and freight charges.
