Hardly weeks after the fuel prices in Kenya rose to a historic high, oil marketers demand payment for transportation costs of oil from the Kenyan ports. This follows after a 40-year-old supply line encountered problems in its supplication. Officials of the oil marketing firms have made their demands known to the Energy and Petroleum Regulatory Association (EPRA) after sourcing the petrol and diesel from Mombasa by oil tankers for many months. The demand from the oil marketers could see the fuel subsidy fund exposed to new pressure at a time when the exchequer is struggling to keep the scheme afloat.
The oil marketing firms obtain their fuel supplies from the Kenya Pipeline Company depots at the Jomo Kenyatta International Airport, Nairobi terminal, Konza, Nakuru, Eldoret and Kisumu. However, the decommissioning of Line 1 two years ago, has reduced the fuel pumped into these oil depots from 1500 cubic metres to 950 cubic metres. This has forced Oil marketers to use trucks from the oil port in Mombasa, hence the compensation demanded increased transportation costs and other involved costs.
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If the state considers the oil compensation to the oil marketing firms, it could lead to increased costs of fuel and would shake down the current fuel subsidy. Distribution costs would account for KSHs. 3.35 per litre of petrol and KSHs. 3.05 per litre of diesel in the monthly review on May 14th. The current fuel subsidy keeps the fuel prices at KSHs. 144.62 per litre of petrol and KSHs. 125.50 per litre of diesel. Without the subsidy, the calculated prices would be soaring at the highs of KSHs. 173.70 and 165.74 per litre of petrol and diesel respectively.
“EPRA expressed willingness to consider reinstatement of compensation through the pricing formula on a temporary basis. The gap in supply has been due to the decommissioning of Line 1 because of safety issues. Prior to this decommissioning, the combined flow for the capacity for the Nairobi-Mombasa route was 1,500 cubic metres per hour.”
Said the Director-general of EPRA, Daniel Kiptoo.
“However, the current flow capacity is 950 cubic metres per hour causing a supply gap.”
He added on.
Oil marketers further sought state commitment on the compensation for the transportation costs in the long-term, revealing that it would be necessary to avoid any future supply disruptions similar to the one witnessed for three weeks earlier this month.
