Fuel Supply Shortage Hits Kenya Ahead of Price Review

Long queues are back on Kenyan streets and oil marketers in Kenya are not responding to the shortage when approached for comments. This has rekindled fears of fuel hoarding ahead of the new pricing schedule to be announced soon.

Marketers have in the past been accused of hoarding fuel in anticipation of higher prices to be announced by the Energy and Petroleum Regulatory Authority (EPRA).

In April, marketers withheld the commodity to silently protest about the delayed State compensation under the fuel stabilisation scheme.

Meanwhile, Kenya’s Treasury has cited funding constraints as the reason behind the delays amid increasing pressure for the abolishment of the fuel stabilisation programme that was rolled out in April last year.

KPC Managing Director Macharia Irungu last week called on the government to speed up payments and ease financial woes that have been blamed for the low evacuation of diesel from KPC’s facilities.

Mr Irungu last week disclosed that oil marketers significantly reduced the amount of diesel they evacuate from the pipeline, reducing the ullage levels need to transport super.

Ullage refers to the volume which is left empty in a tank or pipeline so that there is space for fuel to expand.

Oil marketers have since July not responded to KPC’s calls to increase their diesel uplifts citing financial woes due to compensation delays from the government.

“Going by the low uplifts witnessed in Western Kenya, we are likely to stock out on MSP (super) in Western Kenya as from tomorrow September 8 as its receipt is being hindered by the leading AGO (diesel) batches,” Mr Macharia said last week in a letter addressed to Petroleum Principal Secretary Andrew Kamau.

The pile-ups of diesel have affected the Kipevu Oil Storage Facility, Kenya Petroleum Refineries Limited and VTTI Kenya— the three facilities where KPC stores imported fuel at the Port.

For example on July 3rd and 4th, ferrying of super to Western Kenya was delayed by 24 hours while between 17th and 21st last month, transport of the commodity to Nairobi and onwards to Western Kenya delayed by three days.

Oil marketers are grappling with an estimated Sh35 billion in compensation arrears for the monthly cycles of June-July, July-August and the one lapsing tomorrow.

The compensation delays have forced oil majors and independent dealers to rely heavily on bank loans to pay for import cargoes.