Motorists have once again been haunted by a major fuel shortage across the country as many petrol stations’ pumps ran dry.
Outlets outside Nairobi began experiencing fuel scarcity during the weekend with the capital experiencing the shortage today.
Oil merchants in the country connected the scarcity to the State’s failure to commit to the fuel subsidy the government had introduced in April to stabilize oil prices and curb hoarding.
According to the dealers, delay in payment by the government on the fuel subsidy has pushed up prices in the market. This has seen the small retailers hesitate to buy the costly fuel.
“The wholesale market is also dry because the independents are not buying the costly fuel and their stake is huge. The shortages will not go away if the government fails to address the root cause of the problem,” said a CEO of a top oil marketer who sought anonymity for fear of State reprisals.
Oil companies have been hesitant to increase their oil supply due to uncertainty over the State’s ability to compensate them for fuel delivered.
The government has failed to compensate oil marketing companies for three consecutive cycles under the state-funded fuel subsidy programme.
Industry lobby group, Petroleum Outlets Association of Kenya (POAK) disclosed that National Treasury owes oil marketing companies (OMCs) an estimated Sh65 billion.
Through their social media post, the association warned that this could trigger a crisis as OMCs might struggle with their financial obligations, especially when making fresh imports.
“The petroleum industry is owed more today than ever. A bill of Sh65 billion. This is a sizable percentage of the industry market cap (capitalisation), large enough to cause a supply disruption,” POAK said in a social media post.
The companies’ Supply Coordination Committee, in a letter to the Principal Secretary in-charge of Petroleum and Mining Department Andrew Kamau, said the delayed compensation by the government has thrown them in a difficult position to continue with uninterrupted supply of fuel.
“Whereas we reiterate our commitment to support the Government in its noble endeavours to cushion consumers, we hereby convey our concern over the delays in compensation to OMCs,” they said.
“The impact on OMCs is so substantial that they will face immense financial constraints to continue with uninterrupted supply. This letter therefore serves as notification to the authorities on the imminent inability of the OMCs to meet their supply obligations unless there is prompt payment of the outstanding amounts to mitigate the financial constraints currently faced.”
Their letter is also copied to the Cabinet Secretary Ministry of Petroleum and Mining Monica Juma, the Energy and Petroleum Regulatory Authority (Epra) Director-General Daniel Kiptoo and the Petroleum Institute of East Africa (PIEA) General Manager Wanjiku Manyara.
EPRA yesterday said that the government was working to settle all arrears owed to dealers.
The government, however, blamed hoarders for the shortfall and insisted it had sufficient capital to compensate the traders.