Price cap pushes dealers in Turkana out of oil business

Fuel pumps at a station in Nairobi, May 14, 2020. [Elvis Ogina, Standard]

Dozens of petroleum dealers in Turkana County have closed business owing to the high cost of operations.

The dealers say the petrol pricing formula fails to factor the logistical nightmare and the cost of insecurity in the area.

Moses Barasa, a petroleum retailer in Lodwar town, Turkana County, says he has nothing to smile about in his line of business owing to the daily losses he makes from the sale of fuel at his Cinoc Oil Petrol Station.

Since last year, Barasa says some petrol stations in Turkana have faced a harsh business environment that has driven them out of fuel business.

Barasa, together with other petroleum dealers in the country, note that the pricing formula used by the Energy and Petroleum Regulatory Authority (Epra) to determine retail prices fails to capture certain considerations specific to the retail business in Turkana.

These include the long route from Eldoret's KPC depot, where they pick the oil products.

The route is also littered with insecurity. “We cannot afford to sustain our business. we are running at losses every day. We have considered closing down the business due to an unfavourable pump rate. We have no option but to lay off most of our workers,” Barasa said.

Barasa noted that the main route used to transport fuel from Eldoret to Turkana makes it costly for him and other retailers.

“The distance from Eldoret to Lodwar is more than 400 kilometres (km). Going beyond other towns in Turkana means that some proprietors cover close to 700kms to reach the destination. This is becoming difficult to sustain the business,” he said.

Since 2016, more than 40 fuel stations have shut down their operations in Turkana, citing unfair pump prices set by EPRA. Turkana Fuel Proprietors Association Secretary-General Mohamed Haji Ali said they have incurred heavy losses due to the current pump rates.

“We are struggling to sustain our business as a result of high costs of operation in the current fuel prices. Turkana petrol stations dealers through Turkana Chamber of Commerce also called on Epra to reconsider the prices set for Turkana,” Ali said.

He observed that the current wholesale price of Sh112.64 and 131.85 for diesel and super petrol respectively per litre leaves them with a profit margin of less than Sh4 per litre to sustain their business.

The pump price for diesel in Eldoret where the depot is based is Sh108.46 while super petrol goes for Sh127.67.

The association officials faulted Epra for not considering transport costs, security escort, county charges and fuel loss due to temperatures variation.

“If the situation continues at this rate, most stations will be closed and such a situation will render hundreds of people jobless,” he said.

Kenya National Chamber of Commerce and Industry Turkana Branch Chairman Pius Ewoton said they were in dialogue with Epra to address concerns raised by the fuel proprietors.

Epra manager in charge of the north-western region Francis Keri said their office in Nairobi had picked up the issue, but admitted that there were some delays to act due to the changes of management at the Nairobi office.