Business Daily Africa, January 18, 2012
By Daniel Asher
There is every indication that major players in the local oil industry fuel sector tend to influence retail prices even if it means creating shortages at the expense of consumers.
The oil marketers are always eager to act swiftly when the regulator revises fuel prices upward with the effects of such changes being felt instantly at the pumps across the country with uninterrupted supply.
The upward price revision always takes effect immediately without regard as to whether it is “old stock or “new stock” as dealers quickly move to maximise on their profits by ensuring uninterrupted supply.
Scenes of motorists making long queues for fuel products are non existent as the products are promptly made available in all stations countrywide.
However, the latest fuel shortage in the country that came just after the downward revision of the fuel prices by the regulator is a clear indication of how the country is held at ransom by cartels in the oil industry.
It shows the extent to which cartels can go to disrupt supply if only the shortage could result in excess demand thereby leading to high prices at the pumps.
The argument by the sector regulator that the fuel shortage is as a result of increased demand triggered by the announcement of the price reduction is not be credible since the new prices were yet to take effect possibly due to the artificial shortage of the fuel products in many stations across the country.
With the public knowledge that Kenya Pipeline Company is currently operating at full capacity and that oil marketers were not placing their orders and that the few who had were not picking their fuel, concern remains as to whether the regulator has the requisite institutional capacity to rein in these cartels.
The oil companies are holding the country hostage by frustrating fuel supply in the country. Is the regulator capable of ensuring competitive and fair market practices in the oil industry?
It is time the government enacted legislation to tame profit-taking oil marketers in order to protect consumers against the effects of erratic price fluctuations and supply disruptions in the fuel markets.
For long- term economic growth, the government needs to invest more on the efficiency of the refinery and the piping network to reduce on operation and transportation costs of the fuel in the country.
This investment should also entail more storage capacity at the oil storage facility while upgrading the existing Kenya Pipeline Company network.
The implementation of competition-related regulations in Kenya’s oil industry should be closely co-ordinated to curb infringements related to pricing, ensure fair trade practices and consumer protection by all agencies.
The government investment should therefore be aligned to infrastructure that ensures efficiency on the supply chain of petroleum products instead of relying on short term measures of oil products price fixation which only give short term relief to its consumers.
Asher is the consumer programme officer at Consumer Unity and Trust Society, Africa Resource Centre in Nairobi
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