Oil Marketing firms, small petroleum dealers and transporters
are set to gain as the Energy and
Petroleum Regulatory Authority moves to increase sector sector margins, which could equally
push up pump prices.
The regulator has announced
plans to adjust upwards retail
investment margins, operations
margins, wholesale prices, storage
tariffs, inventory financing and
transport tariffs, that will impact
pump prices by Sh7.80 per litre
of petrol, Sh7.75 per litre of diesel while Kerosene could go up by
Sh7.67 per litre in the long-run,
with implementation being done
in phases.
This, even as EPRA
says it will be keen to ensure the
impact on consumers remains
minimal as it strikes a balance between the price adjustments and
the falling global crude prices and
a much stable shilling which has seen the landed cost remain low.
Retail operations margins are
expected to go up to Sh6.61 from
Sh4.14, which includes provisions
for product losses and a markup
on the overhead costs.
Tankers moving petroleum
products will be allowed to charge
Sh1.18 per litre up from Sh0.54
per to deliver products within a
40 kilometre radius of Nairobi,
with a varying rate of Sh19.28 per
cubic metre per kilometre for retail locations outside the pricing
towns.
This has put into consideration round trips by the tankers.
Retail investment margins will
go up to Sh6.17 up from Sh4.05
per litre, wholesale margins will
increase to Sh4.69 per litre from
Sh3.05 while investory financing
will gain from a Sh1.18 charge
per litre.
Other adjustments are
on secondary storage tariffs albeit
marginal increases of cents.
The tariff increase is informed
by the Cost of Service Study in
the Supply of Petroleum Products (COSSOP) undertaken by a
consultant–Kurrent Technologies,
commissioned 14 months ago.
It is part of a five-year cycle
tariff review by EPRA with the
first COSSOP conducted in 2018,
which was implemented in December of that year.
Recommendations from the
first study saw the regulator hand
oil marketing companies a profit margin of Sh12.39 per litre of
petrol, Sh12.36 on diesel, and
Sh12.36 on kerosene.
Investors in product transportation and retail outlets are however the biggest winners in the
latest review, with motorists and
households seen to be the casualties as pump prices are expected
to go up.
Speaking during a media roundtable in Nairobi yesterday, EPRA
director general Daniel Kiptoo
said the adjustment will be done
in phases, with the initial increase
having an increase of Sh3.68 on
a litre of petrol, Sh3.62 on diesel
while kerosene will cumulatively
(all tariffs considered) increase
by Sh3.54.
The five-year review
is pegged on the need to factor in
investment costs in the petroleum
indistry which have since gone up.
For instance, the last time investors in the tanker business had a
review was in 2010.
“We are here to balance the interests of investors, consumers
and the government. In terms of
implementation, we are looking
for a mechanism where we implement this, the recommendation of
this report in phases. We want to
time it at a point where it will not
impact the consumer negatively
and we want to apply it at a time
when we are having the petroleum prices come down,” Kiptoo
said.
He said the move will cushion investors from the high cost of
doing business, where some have
since been pushed out of the market.
“The cost of investing in this
sector has gone up and if you
look for instance at an investment
by the transporter….in 2010, the
cost of diesel was Sh70. This person has been tied to the same delivery contract for all these years.
So there is a justification. If we
don’t do this, many of these businesses will shut down,” Kiptoo
said.
He noted petrol station owners have also been hit by high operating costs including staff costs,
rent, among other bills which if
not addressed, hundreds will be
forced to close meaning loss of
business and jobs with further implications to the economy.
“The overall increase has been
largely occasioned by the significant changes in key cost drivers
for the petroleum pricing components such as exchange rate
inflation, annual minimum labour
wage, consumer price index and
other relevant factors considered
prudent and necessary,” EPRA
said.
