Huge diesel, kerosene price margin raises adulteration fears

Tuesday’s rise in diesel prices by the widest margin in over a decade to retail at Sh91.87 per litre in Nairobi has triggered fresh fears that fuel may be adulterated using kerosene.

Paraffin, which now retails at Sh65.45 per litre, has left a Sh26.42 per litre margin between the two products, an attraction for unscrupulous dealers who mix it with diesel to gain from the price margin.

The wide margin pushed the government in September last year to introduce a Sh18 per litre anti adulteration levy on kerosene to discourage the practice but the margin has since returned, doubling from last month’s Sh13 per litre. The difference is now even wider compared to the period just before the adulteration levy was introduced when the two products had Sh17.8 per litre difference (August 2018).

Petroleum Principal Secretary Andrew Kamau said the wide price difference is only temporary since there has been reduced import of kerosene in the last two months, allaying fears that the margin may bring back adulteration in the market.

“Kerosene was not imported in the last cycle and it has been coming in reduced volumes before then, that is why we have that difference which is only temporary and will normalise once we have more kerosene being imported at the current international crude oil prices,” Mr Kamau said in an interview yesterday.

Kerosene prices surpassed those of diesel in December and January, before the trend was reversed in the subsequent months except May when diesel recorded a Sh19.19 drop.

WIDE PRICE MARGIN

Existence of a wide price margin between diesel and kerosene although expected to be temporary could send authorities back to the drawing board to increase market policing to tame the menace.

The challenge comes barely two months after the Energy and Petroleum Regulatory Authority pointed at the possibility of a new adulterant being used by fuel cartels to increase margins and evade taxes.

Potential risk

EPRA Director-General, Pavel Oimeke, said the authority was concerned that the cabal could be using another by-product of oil and gas production called condensate largely available in Tanzania and which is easy to import.

POTENTIAL RISK

“EPRA is aware of the potential risk of use of condensate as an adulterant especially with increased natural gas production in Tanzania. EPRA will continue being vigilant to ensure that condensate produced as a byproduct of the natural gas extraction process is not imported into Kenya and used as an adulterant,” Mr Oimeke said in late May.

While kerosene is largely used to adulterate diesel only the condensate is also said to be used for mixing with petrol.

Adulterated fuel results in dilution of lubricating oil in engines causing high rate of motor wear and poor performance according to a study commissioned by the Indian government in 2011. The practice was so rampant in the Asian country that used vehicles and spares from the market became very unattractive.

The Kenyan cartel had one time shifted to using Jet A1 fuel to adulterate diesel when kerosene prices shot up but the controlled import of the commodity meant that they would only rely on the little they could lay their hand on from transit jet fuel dumped within the country.