Motorists brace for higher fuel prices as Epra raises oil marketers’ margins
The proposed changes will see petrol prices rise by Sh7.80 per litre, with oil marketers benefiting the most from the revision.
Motorists in Kenya are set to pay more at the pump as the Energy and Petroleum Regulatory Authority (Epra) moves to increase margins for oil marketing companies and fuel transporters.
The regulator announced on Wednesday that the price adjustments are based on recommendations from a newly concluded study on the petroleum sector.
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The proposed changes will see petrol prices rise by Sh7.80 per litre, with oil marketers benefiting the most from the revision. Retailers’ margins will go up by Sh4.59 per litre, while a finance surcharge of Sh0.69 per litre will also be introduced. Additionally, wholesalers’ margins will increase by Sh1.64 per litre, transport margins by Sh0.64 per litre, and tariffs on secondary storage by Sh0.235 per litre.
Epra defended the changes, citing the need to support struggling oil marketers and transporters who have not received a margin review in years.
"Transporters have not had an increase since 2010; many of them have shut down," Epra Director-General Daniel Kiptoo said.
"If you own a truck and you've signed a contract with an oil marketing company (OMC), the OMC can only compensate you based on what Epra has approved, and the last time Epra set a price for transport was in 2010."
The new adjustments, which will also affect diesel and kerosene prices, come after a 14-month study conducted by Kurrent Technologies Limited in partnership with the UK-based Channoil Consulting Limited. The study concluded in February this year and was subsequently approved by policymakers and Epra’s board of directors.
Inflation fears
Fuel prices in Nairobi currently stand at Sh176.58 per litre for petrol, Sh167.06 for diesel, and Sh151.39 for kerosene. The anticipated price increase has raised concerns over inflation, as Kenya heavily relies on diesel for transportation, agriculture, and power generation, while many households depend on kerosene for lighting and cooking.
To mitigate the impact on consumers, Epra said it plans to implement the changes gradually.
"We are looking at a mechanism where we implement the recommendations of this report in phases," Kiptoo said.
"We want to time it at a point when it will not impact the consumer negatively, and we want to apply it when petroleum pump prices are coming down."
Epra officials pointed out that global fuel prices have been declining in recent months, creating an opportunity to introduce the revised margins without significantly burdening consumers.
“We are seeing international Platts prices, which are not within our control, starting to decrease, so we see an opportunity where we will be able to implement these recommendations—even though it’s a margin increase—without necessarily increasing pump prices," Kiptoo added.
The review will mark the first adjustment in oil marketers' margins since 2018. Epra plans to raise the retail investment margin from Sh4.05 to Sh6.17 per litre of petrol and the retail operations margin from Sh6.61 to Sh4.14. Wholesale margins will rise from Sh3.05 to Sh4.69 per litre, while oil marketers will now receive Sh1.18 per litre as compensation for maintaining minimum stock levels, up from the current Sh0.49.
Epra’s senior pricing analyst, Leonard Yegon, explained the rationale behind the increase in stockholding compensation.
"When we reviewed the rate in 2018, the cost of fuel was about Sh70-Sh80 per litre, which has now risen to about Sh170-Sh180 per litre. The value of that stock compared to 2018 has gone up. When you keep stock, it means you are tying up your capital," Yegon said.
The new charges could take effect as early as Friday, when Epra announces fuel prices for the period running from March 15 to April 14.
Transporters, who currently operate on a margin of Sh0.54 per litre of petrol for distances below 40km, will see their margins rise to Sh1.18 per litre. For longer distances, the margin per cubic metre of petrol transported will increase from Sh11.98 to Sh19.28 per kilometre.
Kiptoo also noted that the rising costs have led to some small oil marketers considering selling their businesses to larger operators. The revised margins, he said, would help cushion them from inflationary pressures and ensure business sustainability.
As Kenya braces for the price adjustments, Epra maintains that the new charges are necessary to balance the interests of investors and consumers while ensuring the viability of the fuel supply chain.
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