KPC blamed for costly fuel in Nairobi

Nairobi motorists are, once again, paying the price for inefficiencies of the Kenya Pipeline Company.

The energy regulator yesterday put the blame on KPC, after it emerged that fuel has become cheaper in Nakuru than Kenya’s capital, Nairobi, which is nearer by road to the port city of Mombasa and has enjoyed lower pump prices than the Rift Valley town since onset of State-controlled monthly price adjustments.

The Energy and Petroleum Regulatory Authority (EPRA) Director General, Daniel Kiptoo, in a statement yesterday said pump prices in Nakuru are lower than Nairobi because petroleum products in the capital incur an additional storage charge.
 
“Kenya Pipeline Company Limited does not have truck-loading facilities at the Nairobi depot and the products have to be pumped for this purpose to third-party depots owned and operated by Oil Marketing Companies,” Mr Kiptoo said in an emailed response to Nation.
 
The Epra boss was responding to concerns by Kenyan motorists who are questioning why towns further away from Nairobi had cheaper fuel than Nairobi, despite incurring more costs on transporting the product to their petrol stations.

Private operators

This means that despite being a cash-rich organisation undertaking multi-billion shilling projects every year, KPC is still relying on private operators for the truck-loading facilities, passing on a punitive cost to Nairobi motorists.

KPC has in the past been on the spot for fuel losses that are loaded on consumers through higher pump prices, besides other massive irregularities at the State corporation.
 
Besides Nakuru, other towns where fuel is cheaper than Nairobi include Gilgil and Naivasha, Nyahururu, Mogotio and Londiani.
 
Mr Kiptoo in the statement said that as part of the recommendations of the Cost-of-Service Study of the Supply of Petroleum Products in Kenya (COSSOP), which was conducted in 2018, the secondary storage charge was identified as a prudent recoverable cost meant to cover capital and operating expenditure for the third-party loading depots in Nairobi.
 
“In accordance with the Energy (Petroleum Pricing) Regulations 2010, Nakuru is the main supply point for Naivasha and Gilgil and hence these towns also enjoy lower pump prices than Nairobi.”
 
To deal with Kenya’s more expensive fuel; motorists near border towns of Kenya, Uganda Tanzanian and Ethiopia are resorting to buying fuel in neighbouring countries.
 
For instance, Kenyan truck drivers from as far as Wajir drive all the way to Moyale to fuel across the border in Ethiopia, and then drive back to Wajir to transport their goats to Nairobi.
 
While a litre of petrol in Moyale, Ethiopia retails at Sh68, across the border in Kenya, the same would be more than Sh136. This trend is also pushing price-sensitive consumers to drive to other locations in the country to fuel.
 
The fuel pricing formula was expected to see fuel become costlier as one moves from Mombasa into the mainland. This means that Mombasa should have the cheapest fuel and the price should increase with distance.
 
So all towns on the west of Nairobi are expected to be more expensive due to the transportation costs.

Cheaper prices

 However this is not the case since Nakuru, which is at least 170 kilometres farther away from Nairobi, is enjoying cheaper prices.

Pump prices that are against the principles of the pricing formula is another puzzle that continues to baffle many motorists given that it goes against the stated principles of the fuel pricing formula.  
 
In Nairobi, consumers will this month buy petrol at Sh127.14 per litre, diesel (Sh107.66) while kerosene will retail at Sh97.85 until September 14 when a new pricing schedule will be announced.  
 
Nakuru motorists are the happiest west of Nairobi given that a litre of petrol for another month will cost Sh126.75, diesel Sh107.55 while Kerosene will cost Sh97.76 per litre.
 
In keeping with the formula, Mombasa consumers will remain the happiest nationally, with super petrol retailing at Sh124.72, diesel Sh105.27 and kerosene Sh95.46.
 
Storage and distribution, which includes the transport element, takes Sh3.17 per litre of super petrol, diesel (Sh2.9) while kerosene attracts Sh2.88. The costs include pipeline and depot losses as well as delivery within 40kms of Nairobi.
 
Mr Kiptoo added that EPRA is currently keeping prices constant despite an increase in the landed cost, as part of a deliberate effort by the government to cushion consumers from the sharp increase in international prices.
 
He said the oil marketing companies are compensated for the gap between the actual calculated pump costs and the published prices through funds from the National Treasury.
 
The biggest drivers of expensive fuel in Kenya is taxes. That explains why fuel is cheaper in land-locked Kampala and other cities in the East African region, despite the oil being transported through Kenya after arriving in Mombasa at the same landed costs.
For instance, in the new prices for this month, the landed cost for a litre of super petrol is Sh60.76.
 
But consumers will pay double this amount when they go to fuel at any pump. 
This is the same for diesel and kerosene, which landed at Sh56.32 and Sh53.86 per litre, respectively.
 
The fuel at the pumps doubles to over Sh124 per litre when Epra starts loading them with taxes and other fees.
Another cost is supplier margins, which now stand at Sh5.29 per litre of petrol, Sh2.47 per litre of diesel and Sh1 per litre of kerosene. 
Then about nine different taxes and levies hit the landed cost.
 
In total, as you buy a litre of petrol, taxes and levies account for Sh58.22, diesel (Sh45.97) and kerosene (Sh40.11).
This is how the pump prices for petrol, for instance, move from Sh60.46 landed cost to Sh127.14 in Nairobi.

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