Fuel crisis: Kenya to fine dealers for hoarding
Tuesday April 05 2022
Kenya will fine fuel marketers accused of hoarding petrol and diesel as it released Ksh8.2 billion ($71 million) subsidy arrears to petrol retailers to ease nationwide fuel shortage and forestall a crisis.
Petroleum Principal Secretary Andrew Kamau said on Monday that investigations into the shortage were being finalised, setting the stage for financial penalties and licence withdrawals.
He added that the supply hitches that caused the nationwide fuel shortage are expected to ease from Thursday after oil marketers steeped supplies to stations from depots.
“By Thursday we will be back to normal, today we paid Ksh8.2 billion to the marketers and since yesterday (Sunday) depots were opened and marketers have been working to refill their stations,” Mr Kamau told the Business Daily.
The marketers are said to have gone slow in evacuating their products from the depots to protest delays in the payment of subsidies to the companies.
The government says it owes the companies Ksh13 billion ($112.7 million) and on Monday released Ksh8.2 billion ($71 million) to the dealers, who claim to be owed in excess of Ksh20 billion ($173.3 million).
The respite cannot come soon enough for the frustrated motorists who have formed long queues at petrol stations for days due to the biting shortages.
“This is an artificial shortage,” Mr Kamau said. “We are aware of the hoarding issue and we are dealing with it. You (marketers) can lose a licence but we do not want to go there for now. After the crisis, something must happen because there are conditions attached to those licences.”
The Petroleum Act of 2019 imposes a fine of Ksh10 million or five years in jail for dealers who sell fuel above the price set by the Energy and Petroleum Regulatory Authority (Epra). Those caught hoarding fuel risk fines of not less than Ksh1 million ($8,669) or one year in jail or both.
The energy regulator Epra has also threatened any company found hoarding fuel with deregulation.
Kenya is reeling from a surge in crude oil prices since last year, which has forced it to start subsiding retail prices.
The government rolled out a fuel subsidy in April last year to cushion consumers from the surge in the price of oil in the international markets.
It has so far spent Ksh36 billion ($312 million) subsidising fuel, which has helped stabilise prices at the pump and kept inflation within the government’s preferred band.
But the latest jump is causing cash flow problems at some smaller fuel retailers, leading to supply shortages. The hardships have been compounded by delays in the payment of subsidies to the companies by the government.
Conflicting reasons have been given for the shortage, with President Uhuru Kenyatta attributing it to the global crisis occasioned by Russia’s invasion of Ukraine.
Kenya Pipeline, the national oil storage company, says there is enough stock.
Oil dealers say delayed subsidies promised by the government to oil marketers to cushion consumers from the effects of the global crisis is causing the shortages and price hikes.
The fuel shortage started in the Western and North Rift regions before hitting Nairobi on Friday, triggering panic buying that saw dealers hike prices and others limit the amount of fuel being sold per motorist.
A litre of petrol is retailing at above Ksh200 ($1.73) a litre in some filling stations, breaching the level set by Epra in its last monthly fuel review.
In Nairobi, diesel and petrol prices are capped at Ksh115.60 ($1) and Ksh134.72 ($1.17), respectively, for the month to April 15 — the highest level in Kenya’s history.
Monday’s assurances by the government will ease growing fears that had already seen motorists in border towns cross to towns in the neighbouring countries for fuel.
In addition to straining the government’s finances, higher oil prices also drove up inflation by a half percentage point last month, and it has also frustrated policymakers.
Public transport service providers have warned they will hike fares while the planting season has been disrupted due to lack of fertilisers and enough diesel to power the tractors, underlining the extent of the artificial shortage of fuel.