Home Crisis Government, OMCs row intensifies as fuel shortage bites

Government, OMCs row intensifies as fuel shortage bites

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The escalating fuel shortage in the country saw the government summon oil marketers for a weekend-long meeting in a bid to resolve the stalemate. 

Oil marketers have presented several demands to the government, including the immediate release of the Sh13 billion oil subsidy fund owed to them since January.

A top official of an international oil marketing firm who attended the meetings held on Saturday and Sunday told the Star in confidence that they are also not happy with the government’s threats to sanction them for hoarding. 

”We are not in the business of pleasing the government. We had an agreement…pay us for the much-delayed subsidy refunds. Threats and intimidation will not solve the current crisis,” the marketer who requested anonymity due to the sensitivity of the matter told the Star. 

At the meetings, OMCs revived the bid to push the government to conduct a bi-monthly fuel price review, saying it would boost their cash flows because it would increase the certainty of prices and allow them to sell available stock without waiting for a month to get the prices.

A similar proposal was early this year rejected by  Energy and Petroleum Regulatory Authority (EPRA) which argued that fortnight reviews do not make sense. 

The regulator argued that the current monthly review ensures price certainty and gives it enough time to react to any increase or decrease more effectively.

The government uses the fuel cargoes imported between the 9th and 10th of a month to set the prices that are in place up to the 14 days of the following month.

Yesterday, most parts of Nairobi, Central, Rift Valley, Nyanza, and Western Kenya were still witnessing limited or low fuel, despite the Kenya Pipeline Company (KPC) dismissing the claims of fuel shortage in the country.

KPC managing director Macharia Irungu revealed that there are over 69 million litres of super petrol in its reserves.

Additionally, he said there are more than 94 million liters of diesel, 13 million litres of kerosene and over 23 million litres of jet fuel.

Data show that Kenya uses 165.45 million litres of super petrol every month, 220.57 million litres for diesel and 11.26 million litres for kerosene

A spot check by the Star noticed long queues at almost all petrol stations along Limuru Road, Mombasa Road and Waiyaki Way in Nairobi.

A motorist Rachael Wayua told the Star that he had to drive from Ruaka to get fuel at a petrol station next to Muthaiga Mini Market. 

This is a full-blown crisis. I’ve searched for fuel at five petrol stations before landing here. Global fuel prices are rising, tomorrow is not guaranteed,” Wayua said. 

George Gero, another motorist along Waiyaki Way requested the government to intervene to arrest the current situation. 

Mid last month, EPRA raised fuel prices for Super Petrol to Sh134.72 in Nairobi from Sh129.72 while diesel went by Sh115.60 from Sh110.60. 

The price of kerosene mostly used by rural and urban families for cooking and lighting was retained at Sh103.54 per litre.

Without the subsidy, consumers would be paying Sh155.11 for a litre of petrol, Sh143.16 for a litre of diesel and Sh130.44 for kerosene.

On Saturday, the government directed all OMCs to immediately release petroleum supplies, to ward off the ongoing fuel crisis or face sanctions. 

“OMCs, depot, and retail station operators are hereby cautioned that in accordance with Section 99(1)(k) and 99(1)(n) of the Petroleum Act 2019, it is an offense punishable by law to hoard petroleum or to sell above the published price,” EPRA said in a statement.  

Lexo Energy East Africa MD Jesse Muniu, however, refuted hoarding claims saying oil companies prefer to sell their product to the export market at the expense of the local market.

”The margins usually in the export market are thinner but right now with the opening up of DRC market and Rwanda post-covid means that the demand is very high and margins comparable to Kenya and most importantly cash upfront,” Muniu said in a statement. 

He added that typically the volume ratio for local to export is 60:40 but now it is 40:60.