Iran war: Why Kenyans should brace for fuel crisis despite State's assurance

Despite government assurances by the State on the security of fuel supply in the country, a section of the industry has warned that Kenya is not out of the woods and that oil marketing companies are just getting by with limited stocks. 

The government this week downplayed the supply fears, saying there are no shortages and that the country is adequately stocked. It additionally said arrangements have been made to replenish the stocks on an ongoing basis. 

The attack by the US and Israel on Iran as well as its retaliation on US military assets in the Gulf over the last month, has resulted in the blockade of the Strait of Hormuz, a route used to transport a fifth of the world’s petroleum products. The impact of this is being felt in Kenya, and aside from the shortages experienced this week, analysts have warned of price increases, which will hit multiple sectors and result in high costs of essential goods.

 

Irene Kimathi, the chairperson of United Energy and Petroleum Association (Unepa) said despite governments of adequate supplies, many independent petroleum outlets are currently experiencing shortages and that some major oil marketers are also running on limited supplies.

Total disarray

“The supply situation has not stabilised and in fact by Monday, if nothing is done, it will be total disarray,” she said, noting that independent dealers, many of them serving the vast rural markets are without petroleum products, which is pushing motorists, including boda boda operators to bigger towns that have oil marketing companies (OMCs) branded outlets, where though supply has been shaky and reported stock-outs, they still continue to access fuel. 

“Across many small towns and rural trading centres, the pumps are dry. People are going to refuel in the bigger towns near them that have OMC's service stations and it is possible that they too will be overwhelmed because they are not being replenished as they are in normal circumstances. You can now see that these OMC's stations will start experiencing supply hiccups by Monday.”

Kimathi pointed out that the major challenge lies in the pricing policy that has failed to take into consideration the market realities

She said the maximum pump prices announced by the Energy and Petroleum Regulatory Authority (Epra) had assumed normalcy despite the major disruptions that Gulf oil producers have experienced following the war in the region. 

Strait of Hormuz

In addition to the high cost of moving fuel from the Middle East to other markets following the closure of the Strait of Hormuz, Kimathi noted that the companies contracted by Kenya in the Government-to-Government (G2G) deal have also been sourcing products from other points, including Europe, some of them further from their home ports, which has come at an increased cost. 

She noted that there are instances where the landed cost has been higher by as much as Sh70 per litre.

This is even as OMCs are bound to sell within the Epra-gazetted prices, with a promise of being reimbursed from the pump price stabilisation kitty.

Kimathi called for the suspension of the fuel price capping regime and also opening up the importation of fuel products outside the G2G deal, noting that allowing major OMCs to source products outside the framework would stabilise supply.

“The government should open the market so that the law of supply and demand starts working. The government should also open up importation so that in addition to G2G, OMCs can source their own products. This way, they can help improve the energy security situation,” she said.

“When supply stabilises, we can go back to price controls. As independents, price controls work for us because, without them, major oil firms would price us out of the market because they have access to petroleum products and we do not.

‘‘But for now, price controls are not working. Subsidies will also not work, considering what we are seeing unfold.”

President William Ruto on Thursday said the government has put in place robust measures that will forestall effects on fuel and commodity supplies as a result of the war raging in the Middle East.

He also claimed that some players he termed as profiteers had been creating artificial fuel shortages, whom he warned to release petroleum products in the market or face penalties. 

“As a government, we are working to mitigate and reduce the effects of the challenge we have in the Middle East. So far, we have made very good progress,” he said.

“We have also been clear to our oil marketers and those with storage capabilities that the Government of Kenya  will not entertain artificial shortages that are meant to benefit profiteers.”

“I have tasked the Ministry of Energy to take the lead, work with all suppliers and oil producers that are supplying us and to find, if necessary, alternative sources that would mitigate any shortages.’’

The President spoke as the reality of the conflict hit home, and as industry players started adjusting prices to reflect the high cost of fuel.

Skyward on Thursday informed its passengers in a statement of “an upcoming adjustment in our fares”.

“Effective April 1, a fuel surcharge will be applied to all Skyward Airlines ticket prices,” said the carrier in a statement on Thursday.

International markets

“The aviation industry continues to navigate the impact of the rising global fuel costs, driven by sustained supply pressures on international markets. As internationally imported fuel represents a substantial portion of our operating costs for each flight, these conditions have required us to take deliberate steps to ensure we can maintain a sustainable and reliable service.”

Vivo Energy — which runs Shell-branded retail outlets — on Thursday confirmed it had been experiencing dry pumps at some of its petrol stations, attributing it to a surge in demand