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Consumers fault ERC's hefty fuel price increase

By Michira Moses | March 18th 2015 at 00:00:00 GMT +0300

A petrol station attendant fueling a car. Consumers are outraged by the sharp price increase.

Kenya: Kenyans could for the first time understand why the season of cheap oil is over following the unprecedented price hikes over the weekend.

Amid soaring public outcry following the upward price reviews, the Energy Regulatory Commission has now told The Standard that a sharp jump in the international pricing of petroleum products that happened on February 1, without a corresponding downward adjustment, is to blame for recent hefty hike.

A graphic illustration of the daily average prices on the international markets, as tracked by global benchmarking firm, Platts, shows the spike that was followed by marginal price increases throughout February.

“There was a sharp rise at the beginning of the period that informed the pricing,” Linus Gitonga, Director of Petroleum at the ERC said.

Platts is the world’s largest independent provider of energy and metals information and a source of benchmark price assessments in the physical energy markets.

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The energy regulator relies on the data from the firm to peg prices, but independent oil marketers carry out the actual importation before the commodities are distributed to retail outlet.

“It is conceivable that the importers made much bigger margins than the 12 per cent allowance proscribed by the regulator, as the prices tracked by Platts are only averages,” reckons a consumer watchdog official who declined to be named.

There are 80 companies that are involved in the importation of petroleum products into the country, and it was normal to have a single firm import ‘several’ products depending on its bid, according to Mr Gitonga.

The last pricing review by the ERC that come into force over the weekend incorporated the prices of petrol, diesel and kerosene from February 1, 42 days before March 14. Typically, the pricing is determined by the average prices over 30 to 45 days preceding the review date.

A near Sh5 rise in petrol prices angered majority of Kenyans, with several taking to different platforms to vent their frustrations. Among the first to react is business mogul, Vimal Shah, who termed the rise as unjustifiable on his Twitter account.

“No justification for this increase of fuel prices in Kenya!” Mr Shah, also the managing director of Bidco Oil Refineries ranted soon after the new prices were announced. “Why is ERC doing this?”

Energy costs are a big concern for manufacturers like Mr Shah, often taking up a very significant portion of production costs.

A Standard Digital reader Otoyo Obambla was less diplomatic and suggested that the anti-graft agency needed to urgently investigate possible corruption in determining oil prices.

“EACC should move in to interrogate ERC, when the fuel prices were on a downward spiral, the effect wasn’t felt immediately and the excuse was that the fuel in storage was purchased at the higher price.”

He questioned why the immediate hike of price if the upward spiral has just started. Obambla’s concerns regarding how quick ERC is in raising prices whenever global prices went up, were shared by thousands of Kenyans.

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