EDITORIAL: Ministry’s stance on fuel prices welcome

The decision by the Petroleum ministry to reject a petition by oil marketers for exclusion of cheaper fuel in the review of prices for May is a step in the right direction, given the difficult times that Kenyans are living in.

Marketers were pushing for the energy regulator to base its review of retail fuel prices starting May 15 mainly on the March crude cost of $35.58 a barrel, saying they were unable to sell 40 percent of the expensive fuel they had ordered then due to Covid-19 restrictions.

On the other hand, the ministry argued that the review of maximum retail prices for petrol, diesel and kerosene on the 14th of every month is guided by the law and not any other consideration.

If the marketers had their way, motorists, industrialists and transporters would have been denied the benefits of low global crude prices.

The costs of energy and transport would have, as a result, remained high, and this would have been reflected in the prices of goods and services. With the latest price review, however, consumers in Nairobi will pay Sh82.28 for a litre of super petrol from Sh92.87, representing a Sh10.59 drop while kerosene costs will increase by 3.19 percent to Sh79.79.

What marketers need to do to ensure they do not suffer losses is to either embark on aggressive marketing of their products, including offering discounts, hedging and insuring their businesses from unforeseen shocks. That way, they would not need to petition the regulator or push their customers to pay higher prices.

Innovation is the new normal and fuel marketers should feel challenged to find new and creative ways of ensuring their profitability given then the Coronavirus global pandemic has affected every aspect of business. As such, old models can no longer be relied on to withstand such great shocks as other industries have already deduced the hard way.

As such, they should send their creative teams back to the research room and allow consumers to enjoy low fuel prices in the short run.