PROFITEERS

Oil marketers hoard stock, anticipating price increase

There is an artificial shortage of petroleum products in the country

In Summary

•Large Oil Marketing Companies (OMCs) and retail station dealers are said to be hoarding product in speculation of higher pump prices in next week's monthly price review.

•Shortage has been reported in Western Kenya,Nairobi, Mombasa and other major towns.

Vehicles line up at Total petrol station in Eldoret./
Vehicles line up at Total petrol station in Eldoret./
Image: FILE

Petroleum dealers could be hoarding fuel products anticipating an increase in pump prices on Sunday so that they could benefit from stocks earlier sourced cheaply.

The Energy and Petroleum Regulatory Authority (EPRA) has now warned the  against this as fuel shortage is reported in parts of the country.

According to the regulator, the artificial shortage is widespread in Western Kenya.

A survey by the Star yesterday established parts of Nairobi, Mombasa and other major towns have also been affected with several stations especially those run by independent oil dealers saying they had run out of stock.

 

Large Oil Marketing Companies (OMCs) and retail station dealers are said to be the hoarding product hoping pump prices in this month's price review by EPRA will go up based on recovering global crude prices.

EPRA said the country has sufficient petroleum stocks and those found to be hoarding petroleum products risk a one-year jail term or a one million shillings fine including revocation of their licenses.

“However, preliminary investigations indicate that a number of OMCs are deliberately holding back sales to non-franchised petroleum retailers (independents) in anticipation of a price increase,” EPRA director general Pavel Oimeke said.

Kenya Independent Petroleum Distributors Association claimed big players have locked independent retailers from business by cutting the supply chain.

“It is very serious. We cannot access fuel products. We are forced to buy from pump stations ourselves,” chairman Joseph Karanja told the Star.

Stocks being held by OMCs are from February, March and April as pump prices significantly dropped in May.

 
 

Last month, Supply Coordination Committee (SupplyCor), the umbrella body for oil marketing companies in Kenya which coordinates activities along the fuel supply chain, had asked EPRA to compute May and June prices based on crude oil prices for February and March when prices were higher.

SupplyCor, chaired by KenolKobil’s General Manager Martin Kimani, said OMCs were unable to sell in February and March 2020 priced cargoes during April 2020 as a result of reduced sales.

Overall industry trend shows a 60-65 per cent drop on consumption of fuel products , according to Supplycor.

This disruption of sales has therefore led to accumulation of older priced cargoes in the system which pose a significant commercial exposure to OMCs,” Kimani said.

EPRA however went ahead to cut the prices of super petrol and diesel by Sh9.54 and Sh19.19 respectively from Sh92.87 and Sh97.56 a litre in April-May, to retail at the current Sh83.33 and Sh78.37 per litre, repectiuvely, in Nairobi.

"The changes are as a consequence of the average landed cost of imported super petrol decreasing by 3.8 per cent from $309.03 per cubic meter in March to $188.07 in April," Oimeke said.

Pump prices for Kerosene, used for lighting and cooking by poor households, however increased by Sh2.49 to retail at Sh79.77 a litre.

Global oil prices have remained low this year with Brent crude futures, the global benchmark for oil prices, hitting their lowest level in decades in April after it fell below $20 per barrel.

It has however peaked to above $42 per barrel. Yesterday it traded at an average $39.35 per barrel.

Players in the industry are hence anticipating an increase in prices when EPRA announced new prices by end of this week, hence the hoarding to sell at higher mark-ups.

Yestarday, Oimeke said EPRA will invoke the Petroleum Act No. 2 of 2019 Section 99(1)(k) that forbids hoarding of petroleum products.

Condition no. 15 of the Import, Export and Wholesale of Petroleum Products License and the Retail of Petroleum Products License also bars OMCs and other petroleum products retailers from engaging in activities intended or likely to disrupt or interfere with competition.

This includes but not limited to, cartel like behavior and creation of artificial shortage of petroleum products.

“OMCs and petroleum retail station dealers found to have committed the offence of hoarding shall be prosecuted in accordance with the law and their operating licenses permanently revoked,” he warned.

Oimeke called on members of the public to blow the whistle on dealers hoarding the products.

There are 64 major Oil Marketing Companies(OMCs) in the country with hundreds of independent dealers.