Oil marketers in Kenya are advocating for a deal that would allow them to pass foreign exchange losses on to customers, potentially leading to increa
Oil marketers in Kenya are advocating for a deal that would allow them to pass foreign exchange losses on to customers, potentially leading to increased fuel prices. Talks between marketers and the government are underway, with the aim of recovering past losses incurred due to the depreciation of the Kenya shilling against the US dollar and finding a solution for future losses.
Rubis SA, a multinational company based in France, has disclosed this plan in its first-quarter trading update. Bruno Krief, Chief Financial Officer of Rubis SA, has stated that the application (or non-application) of the Energy and Petroleum Regulatory Authority (Epra) pricing formula has left oil marketers vulnerable to forex losses. Discussions are ongoing to reach an agreement with the Kenyan government regarding the retrieval of these losses.
The proposal to transfer forex losses to customers could result in further price hikes. The Kenyan government recently increased the value-added tax on fuel from 8% to 16%, causing fuel prices to surge. The oil marketers are requesting the government to strike a balance between their interests and those of the customers, particularly as the value of the Kenyan shilling has depreciated by around 20% in the last year.
The Epra, which determines monthly maximum retail prices for fuel, has reported an even weaker position in terms of the exchange rate. As of July 14, the exchange rate stood at approximately Ksh 144.48 per US dollar. This depreciation means that oil marketers have to pay more for importing oil products.
Kenya has been establishing retail fuel prices since 2010 to protect consumers from price manipulation by cartels and to ensure the availability of high-quality products at reasonable prices. The Epra formula takes into account various factors such as taxes, levies, insurance, freight, and distribution costs incurred by oil marketers when setting the maximum retail prices.
Kenya is currently reviewing the existing pricing formula and has committed to completing the process by the end of the month.
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