14 January 2011

Kenya: Cost of Fuel Up as Govt Reviews Prices

Nairobi — Motorists will over the next 30 days pay a minimum of Sh1.45 more per litre of super petrol following the second phase of price review for petroleum products.

The new prices released by the Energy Regulatory Commissioner (ERC) are likely to put Kenyan's to the reality that cheap petrol would be hard to come by in the near future.

According to the price schedule, regular petrol will retail at Sh2.59 more per litre, while diesel and kerosene will cost Sh1.08 and Sh1.53 high per litre in the period.

In Nairobi, pump prices will now retail at Sh95.67 up from Sh94.03 last month, while in Mombasa the new price will be Sh92.53 for a litre of super petrol.

"During December 2010, the international prices of crude oil and refined petroleum products continued on an upward trend which started in July 2010," explained Mr Kaburu Mwirichia, director general of the regulatory authority.

Under the new pricing module, petrol retail prices in Mombasa remains cheaper followed by those of pump stations in Nairobi. The western part of the country is however faced by unprecedented high retail prices that saw many complain during the initial phase of the reviews.

In the current pricing, motorists in areas such as Homabay and Migori will buy a litre of super petrol at Sh99. In Kisumu and Eldoret consumers will see the prices increase to Sh97.87 and Sh97.82 respectively for a litre of petrol.

In the international market, the price of crude oil has been oscillating at a 27-month high price of $91 (Sh7,300) per barrel. This has been attributed to increased demand of crude across the globe especially in the developed countries.

"When the impacts of the above changes are incorporated in the formula for calculating pump prices the overall effect is an average increase of less than 2 per cent of the Mombasa maximum retail prices announced last month," added Mr Mwirichia.

The Petroleum Price Regulations 2010, in arriving at the prices, factors in the average weighted cost, pipeline and processing tariffs. It also takes care of estimated losses from the refinery and during transportation, storage charges and taxes upon delivery in Nairobi storage.

When the measures to review pricing were put in place in December, oil-marketing companies in the country were up in arms against the move. This they said went against the principles of a liberal market such as Kenya, but the Ministry of Energy stood firm on the decision.

As part of the wider industry complaints on the move, Kenya Independent Petroleum Dealers Association (Kipeda) on the other hand accused big oil marketers of hiking wholesale prices to favour their own outlets.

For them, the move, coupled with the high cost of transporting oil products from Nairobi depots, was eroding their profit margins.

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