Fuel shortage hits Kenya

For the past week, Kenya has been grappling with a fuel shortage crisis in various parts of the country, including Nairobi and Western Kenya. The Kenya Pipeline Company has reassured the public that there are adequate fuel stocks in all depots nationwide. However, oil marketers are reportedly hoarding fuel due to the government's failure to compensate them for the increasing costs of importing oil products under a subsidy scheme. Martin Chomba, the Chairman of the Petroleum Outlets Association of Kenya, shed light on the situation during an interview with CNBC Africa. Chomba explained that the shortage is primarily due to supply constraints stemming from the subsidy program. He highlighted that the pricing regime in Kenya mandates price adjustments every 14th of the month, and the current stock is expensive compared to the regulated prices at the pump. This mismatch has led oil marketers to withhold products to avoid financial losses. The situation worsened as independent dealers, who make up a significant portion of the market, were cut off from supplies by multinational companies. This disrupted the fuel supply chain, straining urban centers and causing chaos at petrol stations. Chomba emphasized that resolving the impasse between the government, ministry, and multinational companies is crucial to restoring normal supply. He revealed that discussions were ongoing to address the subsidy issue and expedite the release of products without incurring losses. The government has pledged to subsidize fuel to shield consumers from price surges. Chomba expressed optimism that a resolution would be reached within a day or two, signaling a return to regular fuel availability. To alleviate the current crisis, the government has also committed to disbursing the outstanding 13 billion Kenyan Shillings owed to fuel retailers. However, concerns loom over the sustainability of the subsidy program in the face of fluctuating global oil prices. Chomba acknowledged that while the subsidy might not be viable in the long run, cyclical trends in international oil markets could provide relief in the future. He underscored the importance of transitioning from a subsidy to a stabilization fund to manage price volatility effectively. Amid the uncertainty, Chomba reassured the public that the government is dedicated to mitigating the fuel shortage and ensuring access to affordable fuel for all Kenyans.