Fuel prices start to bite in rural areas as cartels emerge to beat new rules

Motorists and other consumers up-country have started feeling the pinch of the government’s decision to regulate prices to reign in the oil marketing companies.

A number of motorists who travelled outside Nairobi had to contend with prices higher than those paid in the city. Some fear a new form of cartel-like behaviour is developing.

According to the prices released by Energy minister Kiraitu Murungi on December 15, last year, consumers in towns like Kisumu, Nakuru and Eldoret are expected to pay Sh96.25, Sh95.10, and Sh96.19 per litre of petrol respectively.

However, in Mombasa, consumers are paying Sh91.08 for a litre of petrol. The recommended retail price in Nairobi is Sh94.03 per litre of petrol.

“Price control has a two-fold aim of protecting consumers and ensuring that industry players recover prudently accrued costs and make reasonable margins,” Mr Murungi said on the Energy (Petroleum Pricing) Regulations 2010.

In the past, motorists in Nairobi were forced to dig deeper into their pockets because it attracted the highest pump prices compared to other areas across the country.

Other major towns retailed the product lower, with the prices getting cheaper as you went further into the countryside.

Energy Regulatory Commission (ERC) director general Kaburu Mwirichia maintains that the pricing model takes into considerations all operating costs of the marketers.

But following the gazetting of the regulations, a number of fuel stations across the country adjusted their prices upwards to meet the ceiling requirements.

In places like Eldoret, where initial prices were at Sh92.90, station owners reviewed the prices to be at par with the recommended Sh96.19.

Independent fuel dealers have petitioned Mr Murungi over the regulations, warning that they were driving them out of business.

The Kenya Independent Petroleum Dealers Association (Kipeda) is accusing big oil marketers of hiking wholesale prices to favour their own outlets.

They said the move, coupled with the high cost of transporting oil products from Nairobi depots, was eroding their profit margins.

Kipeda chairman Keith Ngaruchi said setting the retail price of petrol at Sh94.03 in Nairobi prompted wholesalers, mainly major dealers, to adjust wholesale prices to Sh92.

Despite Mr Murungi defending the move as aimed at protecting consumers from the runaway profiteering by oil marketers, consumers of kerosene, too, have raised concerns as they have suddenly been hit by price increases.

Under the previous regime, the price of kerosene was relatively affordable as it was subsidised by earnings from petrol and diesel.

The subsidies were removed and the product, which is widely used by the urban and rural poor, now retails at Sh75.83 for a litre in Nairobi.

In line with the regulations, the prices are to be reviewed every 30 days and the next set of price review is expected to come up on January 15 when the ERC will publish them.

As opposed to previous years, the festive season did not report widespread shortage of petrol.