22 January 2016

Kenya: Energy CS Keter Asks Erc to Cut Fuel Prices Further

Energy Cabinet Secretary Charles Keter has challenged the Energy Regulatory Commission (ERC) to reduce the oil marketers' margins allowed in its pricing formula and cut fuel prices.

The margin refers to the fixed component that takes care of costs incurred by wholesalers and retailers to distribute fuel products.

He also wants the energy sector regulator to reduce water pumping tariffs to allow consumers access cheap clean water.

"The cost of crude oil has gone down, the price of petroleum products is still high. There is need to review the calculation of oil pricing in the country. We know it can be done if you are keen to do it," he said.

The CS was speaking at the ERC offices when he met the regulatory board for introduction. He also warned ERC that the government would not approve any additional costs for energy.

Against expectations

Last week, ERC announced a reduction in the prices of diesel and super petrol of below Sh2 per litre, against strong expectations that the cost would drop by at least Sh10 going by the trend in the pricing of crude oil.

The move was highly criticized by the consumers federation of Kenya (Cofek) which accused ERC of engaging in "price fixing" rather than regulating prices of fuel.

Crude prices are at their lowest since 2003, trading at below $30 a barrel. A steep drop in global oil prices has been experienced since mid-2014 following failure by the organization of petroleum exporting countries (Opec) to adopt a production quota to curb oversupply.

Analysts expect the drop to sustain this year supported by increased production from Iran whose sanctions were lifted recently and a decline in demand from China following a slowdown in its economic growth.

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