Kenya’s oil dealers warn of looming fuel crisis
Saturday August 20 2022
A petrol station attendant fuels a car. PHOTO | FILE | NMG
Kenya is facing the risk of another fuel crisis that could paralyse transport services and inflict more pain on households and businesses weighed down by a high cost of living.
The latest fears come amid the government’s failure to compensate oil marketing companies for three consecutive cycles under the state-funded fuel subsidy programme.
The EastAfrican has learnt that OMCs are demanding Ksh65.06 billion ($546.722 million) from the government, an amount which has remained in arrears for three consecutive cycles (June, July and August).
The companies’ Supply Coordination Committee, in a letter to the Principal Secretary in-charge of Petroleum and Mining Department Andrew Kamau, said the delayed compensation by the government has thrown them in a difficult position to continue with uninterrupted supply of fuel.
“Whereas we reiterate our commitment to support the Government in its noble endeavours to cushion consumers, we hereby convey our concern over the delays in compensation to OMCs,” they said
“The impact on OMCs is so substantial that they will face immense financial constraints to continue with uninterrupted supply. This letter therefore serves as notification to the authorities on the imminent inability of the OMCs to meet their supply obligations unless there is prompt payment of the outstanding amounts to mitigate the financial constraints currently faced.”
The OMCs’ Supply Coordination Committee comprises TotalEnergies Marketing Plc, Galana Oil Company, Vivo Energy Kenya Ltd, Hass Petroleum Kenya Ltd and Rubis Energy
Others are Ola Energy Kenya Ltd, Oryx Energies Kenya Ltd, Gulf Energy Ltd, Riva Petroleum Dealers Ltd, Gapco Kenya Ltd and Fossil Supplies Ltd.
Their letter is also copied to the Cabinet Secretary Ministry of Petroleum and Mining Monica Juma, the Energy and Petroleum Regulatory Authority (Epra) Director-General Daniel Kiptoo and the Petroleum Institute of East Africa (PIEA) General Manager Wanjiku Manyara.
The regulator, Epra, has retained the retail prices of fuel for the month of July and August with the pump price for super petrol, diesel and kerosene in Nairobi trading at Ksh159.12 ($1.33), Ksh140 ($1.17) and Ksh127.94 ($1.07), respectively.
In July, President Uhuru Kenyatta directed the National Treasury to release an additional Ksh16.67 billion in fuel subsidy to cushion consumers ahead of the election on August 9.
The government introduced the fuel subsidy programme in April last year to cushion consumers against volatility in crude oil prices in the international markets.
The subsidy is supported by the Petroleum Development Levy which was increased to Ksh5.4 ($0.04) per litre of petrol and diesel from Ksh0.4 ($0.003) in 2020
However, the government’s pressing needs have seen the national Treasury divert funds from the kitty to meet other government obligations.
Kenya plunged into a fuel crisis in April this year as the state confirmed cases of fuel hoarding and shifting of fuel meant for local consumption to the export market by some oil marketing companies.
The fuel shortage was caused by oil marketers that were protesting the government’s delayed compensation and the monthly pricing formula that exhibits a one-month lag in terms of international crude prices.
Russia’s invasion of Ukraine and the surge in international crude prices has compounded Kenya’s cost of living with overall inflation for the month of July increasing to 8.3 percent from 7.9 percent in June, with the shilling falling as low as Ksh119 against the US Dollar.