Motorists and other consumers of petroleum products have received a big relief after the government published a price formula to be used by all industry players to determine their pump prices.
The Energy (Petroleum Pricing) Regulations 2010, contained in a special gazette notice signed by Energy minister Kiraitu Murungi and which will take effect on December 15, will see marketers making a profit of Sh6 at the wholesale level and Sh3 at retail level.
The pricing structure, which will see pump prices remaining unchanged for at least a month, ends an era of arbitrary price increases that oil marketers have enjoyed since 1994.
“The maximum determined prices shall become effective on the 15th day of every calendar month and shall remain in force until the 14th day of the following calendar month,” said the gazette notice.
This means that the oil dealers, long accused of profiteering, can charge consumers a maximum of Sh94.80 per litre for petrol, Sh76.60 for kerosene and Sh87.90 for diesel in Nairobi.
Oil dealers who fail to comply with the new price regime risk a penalty of up to Sh1 million or have their operating licences withdrawn.
A spot check in Nairobi’s city centre on Monday revealed that Shell was selling diesel for Sh88.90 per litre on Kenyatta Avenue. KenolKobil sold diesel at Sh88.80 on Koinange Street while Total was selling it at Sh88.90 on Kimathi Street.
In other areas prices varied depending level of competition and location of outlet.
But in a swift move, which seems to be the government’s twin-pronged strategy to force the marketers to lower their prices, State-owned National Oil Corporation of Kenya reduced its pump prices for diesel by Sh4 per litre to Sh83.90 in Nairobi.
The company said prices across other parts of the country will be reduced proportionately.
“This reduction of pump prices follows the arrival of the first consignment of 25,000 metric tonnes of environmentally-friendly low sulphur diesel at Kipevu Oil Terminal in Mombasa on November 20, 2010,” said National Oil acting managing director Sumayya Athmani.
The company, which has statutory mandate to stabilise the cost of fuel in the country, is required to import 30 per cent of Kenya’s fossil fuel needs.
However, in a statement sent to the Capital Markets Authority and the Nairobi Stock Exchange, one of the biggest dealers, KenolKobil, expressed both surprise and concern at the move, saying the government never consulted with major oil players.
“KenolKobil is not opposed to the ‘price controls’ per se. But these must be transparent and the result of regular reviews by independent, professional, third party bodies and must take into account all cost factors influencing the marketing of petroleum products,” said the statement signed by its chairman and Group CEO Jacob Segman.
The government’s decision comes at a time when the country is going into the December festive season that has previously been characterised by fuel shortages and unjustifiably high price increases.