Firms hoard petrol, diesel to protest late payments

Motorists lined up at a petrol station along the Eldoret-Kapsabet highway due to a fuel crisis across the North Rift Region on March 28, 2022. [Christopher Kipsang, Standard]

Motorists in some parts of the country are grappling a major fuel shortage as oil marketing firms reportedly hoard petroleum products to protest at the government’s failure to pay them outstanding subsidies running into billions of shillings.

The government pays monthly subsidies to the oil marketers to stabilise the prices of petroleum products as a measure to control the cost of living and cushion consumers from price increase shocks.

Petrol stations in the North Rift and Western Kenya have been reporting stock-outs over the last few days and the situation got worse yesterday, a scenario that industry players warn could unfold in other parts of the country.

Some unscrupulous traders in North Rift towns took advantage of the shortage to raise pump prices. They sold petrol and diesel above the maximum recommended prices set by the Energy and Petroleum Regulatory Authority (Epra) every month. Epra sets the prices on the 14th day of each month. In the latest review, it raised petrol and diesel prices by Sh5 per litre but the cost of kerosene remained unchanged.

Industry sources claimed that oil marketing companies were hoarding products to protest the failure by the government to remit funds it owes them for foregoing their margins under the fuel stabilisation programme. 

To keep the fuel prices stable, the firms have been foregoing their margins but are later compensated by the government with money from the Petroleum Development Levy.

The firms say they are owed Sh32 billion, which would be equivalent to margins for about four months, going by the Sh8 billion, which the Petroleum Ministry has in the past said is the amount paid monthly by the government to cushion Kenyans from high cost of fuel.

However, the Petroleum Ministry has disputed the figure, saying it owes the industry Sh13 billion.

Mr Andrew Kamau, the Principal Secretary in the Petroleum Ministry, said the shortage of fuel was due to panic buying after motorists reacted to reports of petroleum product shortages in the country.

“The pending bill is only Sh13 billion, which is just 1.5 months and is being processed… (it is) pending verification before payment,” he said.

Epra in a statement attributed the stockouts to “unprecedented logistical challenges”.

“These challenges have caused independent petroleum dealers to run out of petroleum stocks,” said Epra, adding that it was working together with the Petroleum Ministry and oil firms to resolve the supply hitches.

Mr Joseph Karanja, chairman of the Kenya Independent Petroleum Dealers Association, said the shortage had persisted for more than a week now and has been snowballing into what might potentially become a crisis if not dealt with.

“Major oil marketers have not been releasing products to us,” he said. Petroleum Outlets Association of Kenya national coordinator John Njogu said the shortage has seen over 200 fuel stations in various parts of the country closed down.

“This has affected towns like Kajiado, Githurai, Kitui, Nyahururu and North Rift among other areas,” Mr Njogu said in a phone interview.

Access to fuel

The shortage has been occasioned by limited access to fuel stocks held by multinational oil companies by independent fuel dealers, who control about 45 percent of the market.

“The situation will get worse as multinational oil dealers cannot supply fuel alone. Independent fuel dealers are ingrained in various parts of the country, and they will be under pressure to sell fuel at whatever costs,” he said.

A spot check in Kitale revealed that the prices for petrol ranged between Sh135 and Sh150 per litre, while diesel was sold at Sh116 per litre. There was a scramble for the commodity at some filling stations.

In Turkana, the shortage has affected transport in major towns like Lodwar, Kakuma and Lokichoggio after several fuel stations ran dry. In Kakuma, a litre of petrol retailed at Sh300. 

[Lynn Kolongei, Osinde Obare and Lucas Ngasike]