Petroleum and Mining Principal Secretary Andrew Kamau has blamed Kenyans’ panic-buying habits and small-scale fuel dealers’ financial indiscipline on the fuel crisis that has hit the country hard.
His remarks come on the back of the entrance of the port city of Mombasa into the list of regions facing fuel scarcity. Mombasa is the hub of all fuel that enters the Kenyan market through the sea.
Speaking on Spice FM morning show The Situation Room on Monday, April 4, the principal secretary said if all Kenyans would continue buying fuel based on their normal patterns, the shortage wouldn’t hit the current crisis levels.
Kamau said “panic-buying” was triggered by oil marketers, who sent out an alert that soon they’d be unable to ship in fuel if the government fails to pay the Sh13 billion subsidy that it owes them.
He likened the current fuel crisis to when bank customers receive information, verified or otherwise, that their commercial banks would be declared insolvent.
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“I call it financial runs. Something spooks people, and they head out to their bank to get all their money. So, what happens? You go there, and as the first person, you get all your money. When you are the 10,000th person, they say: ‘no, no, the bank is closed, we are not giving more money’. So, what happens? Another 100,000 people show up to try and get their money out of the ATM. That is what is called a run,” he said.
“That is exactly what is happening now [in regard to the fuel crisis].
“[For] most people, their cars have never seen a full tank. Let’s just say that. All of a sudden, their cars are full, and they’ve even brought jerry cans to store extra. You’ve seen the pictures [of motorists queueing for fuel],” he said.
The panic-buying habit, he said, has pushed petrol stations countrywide to exhaust, in a day, stock that would, ideally, last them for one week.
“What happens when there’s an unforeseen surge in the number of customers? I’m a station owner, I have my tanks filled for what I need for the week. All of a sudden, what I needed for the week, I’m selling in six hours,” he said.
The PS said Kenyans’ panic-buying habit has forced the government to adjust how it works in the petroleum sector, especially in approving fuel for sale.
“[In Kenya], we usually don’t do deliveries on Sundays. Yesterday (Sunday, April 3), we had to get people like KRA to come back to the depots so that fuel can be loaded [for sale]. It is not something that usually happens,” he said.
“Let me make a prediction. All of us will fill our cars by Wednesday, [April 6]. On Thursday, [April 7], there will be no queues at the petrol stations, and fuel will be there. For the next one week, because our cars will be full, there will be no motorists at the petrol stations,” said PS Kamau.
“If we all lived the way we normally live, I don’t think there’d be an issue.”
The principal secretary also blamed the current fuel crisis on what he suggested to be greed by the oil marketing companies. He stated that Ola, Shell (Vivo) and Total Energies collectively control 60 per cent of the fuel market in the country.
“They feel they want to force the government to do something, for example, increase their margins [by releasing the subsidy cash]. It is within their right; they are in business. But, they’re creating panic. Call the Kenya Ports Authority (KPA) now, and find out how many ships [full of petroleum products] are waiting to discharge.”
PS Kamau said in however much the unremitted subsidy cash might have contributed to the crisis, its level of contribution is negligible.
“The subsidy is always a month late, always; we have to do the analysis and establish who is owed what. It is nothing new. We have been paying the subsidy since April 2021.
“What is different is that fuel prices for imports have gone up from Sh90 per litre to Sh170 per litre. What I used to buy one truck for, is now 50 per cent or 60 per cent more. If I haven’t kept the money aside; prudent financial management, cash-flow management, of course I am going to get into trouble,” he said, blaming dealers’ “financial indiscipline” on their woes.
“The subsidy itself has been pretty much constant at around Sh15 or Sh10 per litre, but the price of fuel has gone up [by] more than that; it has gone up by maybe Sh50. So, [the subsidy that the government is paying to the oil marketers] as a percentage [of the overall income] is actually much smaller than what is being envisioned.”
PS Kamau said the government will, by end of Monday, April 4, release the subsidy cash that it owes the oil marketing companies.
“They are being paid. Up to today, they have been paid something like Sh35 billion. That is for the last one year,” he stated.
“People keep saying that the price of fuel keeps going up every month, the price of fuel has only been changed three times in one year, since April last year. It went up twice, and it went down once. It’s all about perception.”
The principal secretary said, as standard practice, the subsidy is paid on already sold fuel, and not at the point of import.
“They (oil marketers) only receive benefit as they sell the product at the pump, which is on a litre by litre basis. Don’t forget [that by the time they’re claiming the subsidy] they’ve imported a ship, or part of a ship. So they pay that upfront, and they recoup their costs as they sell. That’s why petrol station business requires a lot of financial management skills,” he said.
The PS insists Kenya has enough fuel to last the country one month.
“The Kenya Pipeline Company said they have 90 million litres of fuel in the country. Let us say there are two million vehicles in Kenya, 60 litres per car. By the time they finish 90 million litres, it would be a lot of time,” he stated, emphasising: “The fuel subsidy [arrears] is not a [major] contributing factor to the crisis.
“The smaller players have cash-flow issues, and they want to defray some of those issues through the subsidy.”
PS Kamau said that even if the independent oil marketers are paid the subsidy, they’ll still face cash-flow challenges if they don’t embrace financial prudence.
“They are owed [by the government], and we will pay them today. However, they’ll still have to contend with higher import oil price, buy the cargoes that are in the high seas, have to pay their taxes up front. It (Payment of subsidy) doesn’t address the full issue. The issue that we need to address is: ‘how do I manage my business’? That’s the most important thing.”
Oil marketers say for the past four months, the government has failed to remit the subsidy on fuel, making it hard for them to order fresh imports.