Fuel stations close as pump sales drop amid shrinking profits and high business costs

A pump attendant fuels a car in Nairobi. [Elvis Ogina, Standard]

The likelihood that fuel costs could go higher is squeezing motorists more at a time when they are grappling with the high cost of the commodity.

On Monday, Energy Cabinet Secretary Davis Chirchir hinted that the cost could go up to Sh300 per litre due to the Israel-Hamas war.

Small oil dealers are feeling the pinch and some of them are being driven out of a business they have run for years.

In Kakamega town, some petrol stations have closed down due to declining sales. Fralet Petrol station at Lurambi is now an empty shell.

“Under President Mwai Kibaki, independent oil dealers were given authority and the leeway to run their businesses in a profitable way,” Francis Lutta, the proprietor says. “At the time, we used to make between Sh5 and Sh7 profit per litre.”

Lutta says things took a turn for the worse under the Kenya Kwanza administration following increased taxation and withdrawal of subsidies on petroleum products. However, he says the decline in profitability began in 2013.

“The cost of fuel for wholesale is liberalised, yet the price for retailers is controlled by the government. Under such an arrangement, the much we can make from selling a litre of fuel is Sh1. That is unsustainable considering that the cost of power has also gone up. Paying rent, power and workers has therefore become impossible.”

Barely 100 metres away, Evolving Petrol Station is also closed. Vincent Lihondo, the manager, said they have remained closed for about six months.

“The cost of fuel and low demand have driven us out of business. Besides, the exorbitant licence fee by EPRA also makes it hard to compete. We had another branch at Sichirai that is also closed,” adds Lihondo.

At Lubao market, the Lubao Filling Station has not been operating for the last six months due to unsustainable operational costs. Many single-pump stations have also run out of business in Sichirai market.

The situation is the same across Western counties where small petrol dealers have closed.

Lihondo and Lutta said the oil industry is in the clutches of cartels, which makes it hard for small independent dealers to compete.

A week ago, President Yoweri Museveni of Uganda said his country would no longer buy fuel from Kenyan companies, citing inflated costs that he blamed on cartels.

“Small dealers find it hard to secure fuel at the pipeline. We are asked to register with big companies before we are supplied with fuel,” said Lihondo.

“Multinationals buy the fuel and supply to their stations before considering the small traders. This is unfair especially because we are forced to buy the fuel from multinationals at pump prices. That is why we cannot make any profit hence, have been forced to fold up our businesses.”

George Alulu, a boda boda rider in Kakamega town, said their business is dying. “Even though a litre of petrol is over Sh220, customers still insist on paying Sh50 for short distances. From a profit of Sh1,000 daily last year, I barely make Sh500 on a good day. Fewer people now use boda boda.”