Fuel shortage risk as oil marketers reveal Ksh.59 billion pending bills

Major oil marketers in the country have revealed pending bills worth Ksh.59 billion from the petrol price stabilization mechanism (fuel subsidy) alongside difficulties in accessing dollars from banks.

The revelation was made at a 'closed-door' meeting bringing together members of the Petroleum Institute of East Africa (PIEA), Central Bank of Kenya (CBK) Governor Patrick Njoroge and EPRA Director General Daniel Kiptoo on Monday.

Sources have disclosed the meeting’s agenda and details to Citizen Digital after journalists were ejected from the gathering.

The arrears were disclosed by PIEA Chairman Peter Murungi and represented arrears covering three fuel pricing cycles/three months.

Oil marketers stated the arrears represented inherent risks to the continuity of players’ businesses with the pending bills pausing a risk to both working capital and financing options.

The hounding out of media from the summit was deemed as an attempt to manage the problem in public spaces according to the sources.

From a dollar shortage perspective, the oil marketing companies (OMCs) said the inadequate supply of dollars by banks risked the businesses failing to meet costs to pay for imported products and transportation costs from the Port of Mombasa which they say could usher back cases of fuel stock outs at petrol stations around the country.

OMCs estimate their mean demand for dollars per month at Ksh.72.1 billion ($600 million) across recent months in contrast with a prior demand of just Ksh.30.1 billion ($250 million) signifying the impact of higher global commodity prices on dollar demand in the country.

At the same time, the OMCs stated suffering losses of up to Ksh.6 per litre of product sold as the Energy and Petroleum Regulatory Authority (EPRA) uses the official exchange rate for the dollar against a wider margin than the real market rate to calculate mean pump prices.

Moreover, the marketers warned of the emergence of a parallel FX market from the growing difference between the shilling’s valuation in the spot market and the real marketplace.

The CBK nevertheless dismissed fears of a parallel market as a misconception with Dr. Patrick Njoroge fingering ‘misbehaviour’ by players in the FX market for the anomalies.

In his address to the OMCs, the reserve bank boss cautioned some FX market intermediaries including banks of ‘playing hard to get’ with regards to making dollars available to their clients.

CBK expects the dollar shortages to ease as global commodity prices begin to ease off to taper demand for the green buck over time.

On his part, EPRA Director General Daniel Kiptoo says the regulator continues to foster shuttle diplomacy in addressing OMCs concerns including meeting the National Treasury over the marketers' pending bills.