CS Munyes defends hike in fuel prices

Says ministry at an advanced stage of developing a framework for stabilization of petroleum prices.

In Summary

• CS John Munyes said the ministry is at an advanced stage of developing a framework for stabilization of petroleum prices which will ensure consumers are cushioned.

• Energy and Petroleum Regulatory Authority released petroleum pump prices for the period March 15 – April 14, 2021, resulting in a public outcry.

Cabinet Secretary for Petroleum and Mining John Munyes.
PETROLEUM CS: Cabinet Secretary for Petroleum and Mining John Munyes.
Image: HESBORN ETYANG

Petroleum CS John Munyes has defended the hike in fuel prices.

Energy and Petroleum Regulatory Authority (EPRA) released petroleum pump prices for the period March 15 – April 14, 2021, resulting in a public outcry.

The prices of super petrol, diesel, and kerosene increased by Sh7.63 per litre, Sh5.75 per litre, and Sh5.41 per litre respectively.

A litre of petrol cost Sh122.81 in Nairobi, up from Sh115.18 it has retailed at since February 15.

In a statement on Tuesday, the CS said that EPRA uses a formula outlined in the Energy (Petroleum Pricing) Regulations of 2010 to calculate the applicable petroleum pump prices.

He said that the computation takes into account the landed costs, supplier margins, government taxes plus storage and distribution costs.

“Petroleum is imported into Kenya through the Port of Mombasa and transported to the hinterland via the pipeline system operated by the Kenya Pipeline Company Limited (KPC). The last-mile delivery of petroleum products from the KPC depots to the retail stations or other points of consumption is undertaken through road tankers,” Munyes said.

The CS said that the players involved in the business incur costs that are eventually reimbursed through the petroleum pricing process while at the same time ensuring a reasonable return to this particular group of investors.

Further, Munyes said that the importation of Super Petrol, Diesel, and Kerosene is a highly controlled process, and licensed Oil Marketing Companies are obliged by Legal Notice No. 24 of 2012 to only import the aforementioned petroleum products through the Open Tender System (OTS).

He also added that taxes and levies form a key component of the petroleum pump price not only in Kenya but across many countries.

“The contribution of taxes and levies to the current pump price of Super Petrol is 46.68 per cent, to that of Diesel is 42.24 per cent while to that of Kerosene is 40.42 per cent.”

However, Munyes has said that based on the current outlook of petroleum prices, the ministry is at an advanced stage of developing a framework for stabilization of petroleum prices which will ensure consumers are cushioned from petroleum pump price spikes.

“Part of the framework entails the development of Regulations to administer the Petroleum Development Fund; the draft Regulations are at the final stages of development.”

The CS also said that in 2020, many countries instituted restrictions of movements after WHO declared Covid-19 a pandemic.

He said as a precaution, the oil and gas industry across the globe experienced sharp drops in demand for petroleum products which in turn depressed prices.

“By the close of April 2020, the average FOB price of Murban crude 2 | P a g e oil was recorded at US$17.64 per barrel, the lowest since the onset of petroleum pump pricing process in Kenya.”

Munyes said that the price of refined petroleum products in the international markets plummeted with the FOB price of Super Petrol recorded at US$169.80 per metric ton in April 2020.