Kenya: New Push to Rein in Oil Firms

Posted November 9, 2006 in [Energy]

The Nation (Nairobi)

The Government yesterday stepped up its campaign on oil companies to lower pump prices.

And as the State did this through acting Energy minister Henry Obwocha, Ndhiwa MP Orwa Ojodeh took a motion to Parliament seeking permission to introduce a Bill that will amend the law to give the Government control over fuel prices.

The state says that the oil companies are yet to pass full benefits of a fall in world prices to customers.

If Mr Ojodeh's motion gets Parliament's backing, then the MP could bring a Bill that would amend the Petroleum Act to give powers to the Finance minister to fix fuel prices.

In stepping up the campaign, Mr Obwocha released details of each company's pump prices and urged consumers countrywide to fuel their vehicles at stations with the cheapest retail prices.

"We advise consumers to buy from those dealers posting favourable prices," he said in a statement.

According to a research conducted by his ministry nationwide, oil prices should have fallen by at least Sh6.20 per litre.

This means Nairobi motorists should be paying Sh77.02 per litre for super, Sh67.05 for diesel and Sh55 for kerosene this month, he said. But instead, the oil companies have reduced the pump price by only Sh3.66 per litre.

The survey was commissioned last week by the Finance minister Amos Kimunya saying it would form the basis for the Government to bring back price controls in the oil industry.

Some oil companies have told consumers not to expect any further price reduction unless the Government reduced taxes on crude oil.

Oil companies have also raised issue with a recent crude oil process fees increase by the Government-owned Kenya Oil Refinery Limited from $1.75 to $2.15 per barrel in the last two months.

Independent oil operators have also blamed the rule insisting that oil companies must process 50 per cent of their requirements through refineries. This, they said, was the reason why prices are yet to fall.

The refinery is jointly owned by some of the major oil marketers in the country and the Government. "The effect of the requirement is to compel the petitioners to agree to incur a guaranteed loss, because the technology used by Kenya Refineries Limited is obsolete," say two operators who have sued the Government on the rules.

The survey conducted on November 1, shows that Total Kenya retail outlets are the most expensive selling almost Sh4 above the cheapest dealers in the market.

Total outlets are selling Super petrol at Sh80.99 same as Mobil, Kobil Shell and Kenol but has the highest minimum retail price of Sh79.99 unlike the others which have a minimum retail price of between Sh78.19 and Sh78.89.

The cheapest is the Government owned National Oil Corporation of Kenya (NOCK) selling super petrol at Sh78.49 per litre and Sh68.49 for diesel. South African firm, Engen, is the cheapest for Kerosene selling at Sh55 per litre.

The Government notes that its computation is based on world oil prices. Between July and September the price reduction of Murban crude oil dropped from $73 to $63.25 per barrel, equivalent to Sh4.48 per litre and to $59.35 in October translating to Sh1.79 per litre reduction.

Going by the figures, the maximum Nairobi pump prices in November should be approximately Sh77.02 per litre for super petrol, Sh67.05 per litre for Diesel and Sh55 for Kerosene.

"The oil companies have, therefore, not passed on the full benefits of the falling prices to customers," says Mr Obwocha.

During debate in Parliament, MPs took issue with Mr Kimunya, for only threatening, but failing to act on oil firms.

The MPs, who included Health assistant minister Dr Enock Kibunguchy, demanded that the oil firms reduce their prices or have the Government fix the prices.

They accused the Government of allowing a handful of multi-national oil firms to form a cartel and dictate prices in the country.

 
Mr Ojodeh asked why the Energy ministry had been without a minister for the past 10 months, since President Kibaki dropped Mr Kiraitu Murungi.

Mr Obwocha, the Planning and Development minister, has been acting in the docket since.

Yesterday, the Ndhiwa MP claimed that Total, Kobil, Shell, Chevron and Mobil had formed a cartel to fix prices taking advantage of the liberalised market. He said they were overcharging by up to Sh10 per litres of the products.