EDITORIAL: Protect consumers from greedy oil marketers
The article by yours truly that sparked a nationwide debate>>>>>
EDITORIAL: Protect consumers from greedy oil marketers
By BUSINESS DAILY
Posted Tuesday, January 26 2016 at 18:35
Posted Tuesday, January 26 2016 at 18:35
The push by oil marketers for a fuel pricing formula
that factors in inflation and interest rates fluctuation lacks merit --
coming as it were at a time when consumers are grappling with
relatively high pump prices in the wake of record low global crude
prices.
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Theirs is clearly a quest for higher profit margins that
is blind to the wide ranging impact such an action would have on
the economy, including driving up inflation pressure which would in turn
see them demand even higher pricing of petroleum products at the pump.
The fact that independent oil marketers are selling
below the set minimum prices to attract consumers speaks to the very
important fact that profit margins are good.
The Sh1.50 per litre discount shows that there is
room for the oil majors to review their margins downwards and offer not
only the consumer, but the entire economy some good measure of relief
in the medium term.
For the past two years, the marketers have enjoyed a
21 per increase in margins following the closure of the Kenya oil
refinery that paved the way for import of cheaper refined products.
We therefore find the oil marketers’ proposal that
the Energy Regulatory Commission (ERC) should adjust margins upwards to
protect them against volatile interest rates and inflation insensitive
and uncalled for.
The oil sector is a sensitive industry whose
operations have far reaching ramifications on nearly all facets of the
economy, especially manufacturing, agriculture and transport sectors.
Traditionally, manufacturers and transporters
respond to fuel price increments by passing on the costs to consumers
in the form of higher retail prices.
In fact, as things stand now, oil marketers and the
market regulators should be spending more of their time looking at
ways of making consumers benefit from the rock-bottom crude prices.
It does not help that the Treasury is still
mulling over a possible introduction of a 16 per cent value added tax
(VAT) on petroleum products whose impact would be to further increase
prices.
Add onto this the Sh19.89 or $0.18 per litre excise
tax, Road Maintenance Levy of Sh12 per litre, Petroleum Development
Levy of Sh0.4 and the Petroleum Regulatory Levy at Sh0.12 per litre and
you have your pump prices up there.
We would like to take this early opportunity to
remind the ERC that its core mandate is protecting consumers against
cartel-like behaviours of the type some marketers are pushing for.
Price controls have denied Kenyans the benefits of
low crude prices, and the inclusion of inflation and interest rates
in the pricing formula can only increase consumers’ burden.
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