Kenyans Face Fuel Shortage
68 percent of the market’s independent fuel retailers cited the Energy and Petroleum Regulatory Authority (EPRA) subsidy that has reduced their margins for the impending fuel shortage in Kenya.
The Petroleum Outlets Association of Kenya (POAK) reported on Thursday that its members’ margins have shrunk since the State removed wholesale limits, causing some retailers to incur losses.
John Njogu, chief executive officer of POAK, told PoliticalPulseChat that while the subsidy protects consumers, it has left gas stations vulnerable, with some unable to turn a profit and thus forced to close.
“Without a wholesale cap, independent players, who make up 68% of petrol stations in Kenya, purchase fuel at Ksh1 margin or zero margin, which forces them to close their petrol stations due to a lack of profitability,” he explained.
POAK argued that independent suppliers were unable to provide fuel to motorists in the absence of a wholesale limit because they accessed fuel from wholesalers at the same rate as EPRA-approved pump prices.
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POAK had complained, “Price stabilization is supposed to support the entire industry.”
How retail cap functions
According to Njogu, three main players are involved in the logistics of fuel: importers, wholesalers, and retailers.
“With a wholesale cap, there is a Ksh12.36 margin per liter of fuel between the importer and the retailer,” he explained, adding that wholesalers were required to sell to retailers at a Ksh8 margin.
Njogu explained that, with stabilization in place, OMCs were free to set their own wholesale prices.
Since the marketers also operate their own pump stations, they were selling fuel to retailers at the EPRA-approved pump price of Ksh193 or Ksh194.68 per gallon.
“This means that the majority of gas stations cannot make a profit and are closing their doors until the government reinstates the cap, allowing them to sell at a profit,” he explained.
Njogu stated that the majority of rural areas will be without petroleum, as the majority of independent retailers do not serve remote areas.
Kenyans Face Fuel Shortage
