Kenya shifts blame over fuel prices

Energy Permanent Secretary Patrick Nyoike. The government has blamed the rising cost of fuel to the growing unrest in the Arab world and the poor performance of the Kenya shilling against the US dollar April 21, 2011. FILE

By PETER LEFTIE
Posted  Thursday, April 21 2011 at 11:54

The government has blamed the rising cost of fuel to the growing unrest in the Arab world and the poor performance of the Kenya shilling against the US dollar.

In an advertisement, Energy Permanent Secretary Patrick Nyoike while exonerating the government from blame also attributed the rising fuel prices to the global demand which he says has been exceeding supply over the last two years.

“International petroleum prices have been on a continuous gradual increase since January 2009 after a sharp drop in the 2nd half of 2008.

"This increase has accelerated between January and April 2011 owing to unrest in the Middle East and depreciation of the Kenya Shilling against the US dollar, the official trading currency,” the PS noted.

"The global demand has also been on the increase against supply as world economies recover from the global economic crisis of 2007 and 2008."

Mr Nyoike defended the government move to introduce price controls in the oil industry warning that the cost of fuel could have been much higher today had it not acted.

“When an extrapolation formula is applied to compare the current pump prices with the July 2008 pump prices, it can be deduced that the oil marketers, without price control, could have posted product prices of around Sh121.91 for Super, Sh116.34 for Diesel and Sh96.19 for Kerosene. With price control, however, the maximum pump prices posted today are sh111.17 for Super, Sh107.52 for Diesel and Sh90.91 for Kerosene,” the PS argued.

The price controls were introduced on December 15, last year after the government mandated the Energy regulatory Commission to regulate pump prices in a bid to stop oil companies from raising fuel costs arbitrarily.

The government argued then that the reduction of pump prices by oil companies was not commensurate with the drop in crude oil prices.

Mr Nyoike added that besides the price controls, the government was also taking action to cushion Kenyans from the rise in the cost of fuel by reducing excise duty by 30 per cent for kerosene and 20 per cent for diesel.

He further outlined the measures the government was taking to address challenges in the petroleum sector that were contributing to the rising pump prices including plans to install an additional Jetty at the Port of Mombasa.

He said that the National Oil Corporation was in the process of commissioning a feasibility study for an offshore jetty facility at Kipevu with a view to reducing congestion and receiving larger vessels.

The government is also in the process of upgrading the oil refinery at a cost of Sh72 billion, the PS stated. The upgrade is expected to be completed by 2016.

In the meantime, the Kenya Pipeline is installing a new line from Nairobi to Eldoret which will enable it to increase its capacity to pump fuel from 200,000 litres per hour to 600,000 litres per hour.

The company is also procuring and installing new pumps between Mombasa and Nairobi to achieve the maximum pumping capacity of 830,000 litres per hour by November this year, the PS said.