Energy Regulatory Commission blames international dynamics, taxation on higher energy costs

A petrol station attendant fills a vehicle. The regulator blames international dynamics to higher petroleum costs. [PHOTO: FILE]

The Energy Regulatory Commission (ERC) blames international dynamics and high taxation on rising oil prices.

ERC Director General Joe Ng’ang’a said prices set by the commission are a reflection of the global prices and dynamics that include changes in foreign exchange rates.

Speaking to journalists at the confines of a stakeholders’ workshop on electricity, renewable energy and downstream petroleum at the Sportsman’s Hotel in Nanyuki, Ng’ang’a said that after placing orders for oil imports, it takes between 30 and 45 days for the commodity to reach Mombasa Port. He reckons the import date is what the commission uses to compute the price for the various products.

“We transport our imported oil using ships and it takes 30 to 45 days for a ship to reach Mombasa Port from the Caribbean Gulf.

Ng’ang’a further noted that the local taxation also leads to high prices, adding that duties and taxes charged on a litre of petrol amount to Sh48, while dealers in petrol products also set their own profit margins in the pricing.

“We want Kenyans to know that whether we get that oil free, the Sh48 per litre will not change,” he explained. He added that USA was a major determinant of global oil prices since oil and gas is transacted in US dollars.

This, he said, leads to an increase in prices whenever the local currency weakens against the US dollar. Ng’ang’a further revealed that ERC does not set prices of Liquid Petroleum Gas (LPG), hence absolving the commission from blame over market disparities in its pricing.

He said the role of the regulator is to set prices of products that do not attract competition. “We have so many competitors in LPG sector and the competition helps regulate the prices in the market. We leave the pricing component to the players,” he said.

Fuel Cost

Mid this month, the cost of a litre of super petrol went up by Sh4.06 after the ERC, the energy sector regulator, released the new monthly pump price review.

ERC in the latest review also included a roads levy charge alongside levies to reflect the effects of a weaker shilling to the US dollar.

A litre of super petrol is cheapest in Mombasa and now retails at Sh99.32 and costliest at Mandera at Sh116.46, according to the latest pricing. Motorists in Nairobi, where the highest proportion of fuel is consumed, pay Sh102.65 for a litre of super petrol and Sh83.35 for diesel.

In the international scene, oil prices slipped in cautious yesterday as investors awaited the release of a US jobs report for August that could determine the Federal Reserve’s timetable for hiking interest rates.

US benchmark West Texas Intermediate (WTI) for October delivery lost 36 US cents to $46.39 per barrel. Brent North Sea crude for October dropped 27 US cents in mid-day London deals to $50.41.

Industry data

“With the Federal Reserve closely eyeing employment figures in order to gauge the strength of the economy, US non-farm payrolls should be crucial,” said Daniel Ang, investment analyst at Phillip Futures in Singapore.

“If non-farm payrolls turn out lower than expected, this could suggest a December 2015 rate hike instead” of a move this month,” Ang said.

A rate hike would likely strengthen the greenback, making dollar-priced oil more expensive to holders of weaker currencies, hurting demand and prices.