A major fuel shortage is looming in the country after independent dealers halted purchases from major oil marketers in a wholesale price war.
They accuse the Oil Marketing Companies (OMCs) of violating regulated wholesale prices, with the developments raising the risk of widespread stock-outs and supply disruptions across Kenya, mainly remote areas and small towns.
The Energy and Petroleum Regulatory Authority has told OMCs to adhere to the wholesale cap assuring then that they shall be compensated for anything they sell that is within the expensive cargo.
“EPRA wishes to assure that where individual OMCs access volumes in excess of the volumes factored in the current and subsequent cycles, the excess volumes will be due for advance sales compensation,” Kinyua said.
“This is in a bid to ensure uninterrupted supply in the country and to compensate OMCs exposure to the price lag. This excess volume and any incremental costs thereof shall be considered on a first in first out basis and shall be verified based on the data from the Kenya Revenue Authority.”
The Petroleum Outlets Association of Kenya and the Kenya Independent Petroleum Dealers Association however said: “We are still not buying until we see this directive reflected in the wholesale market.”
They have asked independent petrol station operators to stop buying fuel from all OMCs charging above the wholesale price caps.
The two associations have accused major OMCs of selling petroleum products to independent dealers above the statutory maximum wholesale prices, squeezing retailers' margins and making it increasingly difficult for them to replenish stocks.
The dispute follows EPRA's announcement of maximum retail and wholesale prices for the October 15 to November 14 pricing cycle, which took effect on October 15.
Under the published Nairobi wholesale price caps, super petrol was set at Sh211.80 per litre, diesel at Sh212.60 and kerosene at Sh204.79.
Maximum retail prices (at the pump) were set at Sh226.96 per litre for super petrol, Sh227.76 for diesel and Sh219.87 for kerosene, going up by Sh12.93, Sh9.90 and Sh28.49, respectively.
However, the associations allege that oil marketing companies began selling products to independent dealers above the regulated wholesale limits when the new pricing cycle opened, with some offering the small dealers at the pump prices.
This forces some to increase pump prices further if they are to make a profit, with most opting to operate in losses in avoidance of a breach of the law.
According to POAK, independent stations are already experiencing critical stock-outs in different parts of the country, warning that some outlets could shut down.
“Independent operators are being forced to choose between shutting down operations or operating at severe financial losses,” John Njogu, CEO and coordinator of POAK, said.
The dispute threatens to disrupt fuel distribution, particularly in areas where independent dealers provide a substantial share of retail services.
These dealers account for up to 68 per cent of Kenya's fuelling points and distribute about 40 per cent of the industry's volumes, mainly in regions where major OMCs have less presence.
Independent outlets are particularly important to motorists, Boda bodas and businesses in smaller towns and underserved areas, where they help extend access to fuel beyond major urban centres.
A sustained withdrawal of independent dealers from wholesale purchases could therefore complicate fuel availability for motorists, public transport operators, farmers and businesses that depend on road transport.
Dealers say they had escalated the matter to EPRA and the State Department for Petroleum but that 12 days had elapsed without compliance or enforcement action.
They argue that the alleged pricing violations have undermined the economics of independent retailing, leaving dealers unable to buy fuel at lawful prices while remaining financially viable.
The dispute comes as consumers grapple with higher pump prices following EPRA's latest review, which raised maximum retail prices for the October 15 to November 14 cycle amid rising international oil costs and supply-chain disruptions in the Middle East.
The higher prices have added to operating costs for transporters, manufacturers and other businesses that rely on petroleum products, with further supply disruptions potentially compounding the pressure on households and enterprises.
POAK and KIPEDA want EPRA and the State Department for Petroleum take swift regulatory action against oil marketing companies found to be non-compliant.
They warned that failure to address the dispute could threaten the survival of independent outlets and undermine national fuel supply security.
