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Nock cuts diesel prices as it begins stabilising fuel costs

CARTOON
By | December 7th 2010

By Macharia Kamau

State run oil marketer, National Oil Corporation (Nock), has reduced the retail price of diesel by Sh4 to Sh83.90, and expects its significant reduction in diesel pump prices to be mirrored by other marketers.

Diesel is still priced high at about Sh5 more in filling stations run by other oil marketing companies at between Sh88.00 and Sh91.00.

The move is a relief to the general public, as well as heavy fuel consumers like manufacturing industry, that threatened to pass on increased production costs occasioned by high fuel costs to consumers in the recent past.

The move also comes against a backdrop of an expected legislation that is expected to cap retail prices of petroleum products in the country. The yet to be gazetted law has, however, been opposed by some marketers, who say the Government did not consult widely, and warning that it might lead to product hoarding.

Nock said the reduction was due to implementation of cost management initiatives, as well as importation of 25, 000 metric tonnes of diesel that arrived two weeks ago. The diesel cargo was imported through the 30 per cent quota granted to Nock to import crude and diesel products.

In a June 18 directive, the Energy ministry gave Nock a 30 per cent quota to import crude and diesel products to play a larger role in stabilisation of petroleum product prices.

Reduced proportionately

"Effective today (Monday) Nock has effected a reduction in its pump prices for diesel fuel to Sh83.90 per litre at all its Service Stations in Nairobi," said Sumayya Athmani, acting managing director Nock.

"Prices across other parts of the country will be reduced proportionately. The reduction follows a series of cost management initiatives that National Oil has effected on the pump price of diesel over the last two months."

Petrol prices, however, remain high, retailing for upwards of Sh97.80 a litre in Nairobi’s central business district.

Whether Nock will influence other markets to bring down their diesel prices thus low is yet to be seen, especially given its distribution constraints. The firm only has a 4.1 per cent market share, and other oil companies might frustrate its efforts especially outside the city, where it has few outlets.

"Other than our network, we will also distribute the diesel to another network of independent fuel marketers whom we have encouraged to similarly sell the diesel at prices comparable to ours, so as to pass on the price advantage to the end user customers," said Athmani.

She added that contrary to earlier reports about constraint issues, the market had successfully imported the first consignment of competitively priced diesel fuel.

Meanwhile, KenolKobil said the Government should not interfere with pricing of products until it has widely consulted the industry.

"The price control suggestion is surprising as there has be no consultation by the Government or its regulator with major oil industry players," KenolKobil said.

"There is also the obvious concern that the consequences of Government enforced price controls would probably lead to a shortage of products in the local market."

"KenolKobil is not opposed to ‘price controls’ per se. But these must be transparent and the result of regular reviews by independent, professional bodies and must take into account cost factors influencing the marketing of petroleum products in the country, especially infrastructure costs and damaging effect of system inefficiencies."

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