Petrol consumers slapped with Sh945 million bill

Thursday September 14 2017

A pump attendant fuels a vehicle at a fuel station in Nairobi on September 15, 2016. Consumers of petrol will from Thursday midnight start paying a Sh945 million compensation bill at the pump. PHOTO | MARTIN MUKANGU | NATION MEDIA GROUP

A pump attendant fuels a vehicle at a fuel station in Nairobi on September 15, 2016. Consumers of petrol will from Thursday midnight start paying a Sh945 million compensation bill at the pump. PHOTO | MARTIN MUKANGU | NATION MEDIA GROUP 

By NEVILLE OTUKI
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Consumers of petrol will from Thursday midnight start paying a Sh945 million compensation bill at the pump, after oil marketers incurred costs that were not passed on to customers.

The compensation is meant to cover oil dealers for paying the taxman’s increments in road maintenance levy two years ago.

The companies are also seeking to recover losses incurred when they convert imported super petrol cargo from tonnes, the international standard unit, to litres, at the pumps.

The Sh945 million compensation burden will see consumers pay an additional Sh0.69 per litre of petrol, excluding factors such as global crude prices and foreign exchange fluctuations. Diesel users will not be affected by the compensation costs.

The Energy Regulatory Commission is on Thursday set to announce new pump prices that will take effect from midnight and prevail until mid-next month when they will be reviewed again.

COMPENSATION

Consumers will pay the  compensation bill staggered over six months, starting midnight.

“The cost recovery is expected in subsequent months,” said ERC acting director-general Pavel Oimeke.

The energy regulator imposes price controls for Kenya’s petroleum market to shield consumers from cartel-like behaviour that in the past resulted in exorbitant prices.

The weight to volume conversion losses arise when importers buy petrol cargo weighing more (density) but with less volume, translating to fewer litres and exposing marketers to losses or consumers to higher prices.

This challenge prompted the ERC to introduce in April 2015 an escalation/de-escalation factor in petrol prices to correct the fluctuations, effectively cushioning oil marketers from the losses shock.

IMPORTERS

But the importers of the April 2015 cargo were not covered, exposing them to the loss.

This is the cost consumers will pay for beginning today at Sh0.42 per litre of petrol for the next six months, or Sh348 million, based on Kenya’s average monthly petrol consumption of 138 million litres.

Consumers will also pay an additional Sh0.2699 per litre of petrol for oil companies to recover their costs on roads levy over the six-month period, or a Sh597 million bill. The two bills add up to Sh945 million.