EDITORIAL: Oil marketers should not punish consumers

In liberal economic thinking, price control comes with a lot of baggage to both firms and consumers. Although it comes with the risk of creating market distortions, that has not prevented Kenya from experimenting with the much-critiqued concept despite its chequered outcomes.

One of the clear examples was the controlling of bank lending and deposit rates, which was later dropped last year due to reticence by banks to lend to the individuals and businesses considered risky. But much earlier, the same was experimented in the oil retail sector — which, ironically, was the first to be deregulated in the early 1990s.

The thinking here is that oil retail is so critical to the economy especially in fueling the transport and industrial sectors. For years now, there have been few complaints on the price regulation especially from the oil marketing companies that hold the upper hand when it comes to influence on the relevant arms of government compared to the consumer.

The Energy and Petroleum Regulatory Authority (EPRA) and its predecessor ERC have been in charge of the central sourcing of fuel mainly from the Gulf and subsequently retail pricing.

The system ensures fuel is sourced and offloaded in good time to enable the suppliers and the retailers to make the intended mark-up.

So far, the open tender system (OTS) operated by the ministry of Energy appears to have been working well until the latest self-serving request by the marketers which has correctly been rejected by Petroleum ministry. The upshot of the petition is that companies are allowed to hold on to prices announced earlier as they have been unable to dispose of some of the stock due to the coronavirus-induced low demand. They were pushing the regulator to base its review of retail fuel prices starting tomorrow on the March crude cost of $35.58 a barrel and not the April average of $26.63. Clearly that makes a lot of business sense to the marketers. However, having never offered to forfeit any windfall due to any pricing mismatch in the past, they were certainly clutching at the straws.

Now that the new prices have been announced, marketers must bear the reduced earnings or losses the same way they would have benefited from a windfall. Consumers, especially in this trying period, should not be reduced to hapless bystanders to protect the bottom lines of companies.

The ministry was right to reject the request and should act the same way going forward until such a time as there is a review of the legal regime to accommodate such drastic fluctuations.