Removal of oil price controls exposes Kenyans to cartels

Kenyans, most of whom toil to make ends meet, woke up to startling news; the Government plans to remove price controls on petroleum.

This is devastating coming a few weeks after Central Bank of Kenya Governor Patrick Njoroge indicated they would start the process of rolling back the interest rate control regime that is barely a year old.

In the days when petroleum’s pricing was a Laissez-faire affair, motorists were mostly ripped off at the pump due to a phenomenon known as the “rocket and feather effect”.

This means that when oil prices rose, retailers passed on the full increase in their costs to consumers, causing the price of a litre of diesel or petrol to go up like a rocket.

But when the price of oil fell, pump prices only drifted down like a feather, while retailers pocketed the difference.

Motorists, just like borrowers, feeling exploited, lobbied the Government to put a ceiling on the price that petroleum traders could charge consumers.

There has not been much hue-and-cry since the government decided to control the pricing of the commodity in 2010.

That is why a lot of Kenyans will be surprised by the latest pronouncement by the Cabinet Secretary for Energy Charles Keter that the industry is ripe to self-regulate.

It is the position of this newspaper that as desirable as it is for the market to dictate the price of any goods or services, there is nothing to show that Kenyan traders will not want to cut corners by, for example, colluding to fleece consumers.

Besides just telling us that the industry has since welcomed more players, away from the multinationals that dominated the sector in the pre-2010 period, the Government needs to give consumers a comprehensive plan of how they plan to rein in greedy petrol dealers.

If there is something we can learn from recent events that saw loans also capped, it is that words alone cannot move a trader who is determined to make super-normal profits.

We need more than just words before we can revert to an unregulated petroleum industry.