How Epra plans to increase fuel prices

Fuel prices are set to rise by as much as Sh7.80 per litre in the coming months as the Energy and Petroleum Regulatory Authority (Epra) implements recommendations for a new petroleum pricing regime.

The three petroleum products regulated by Epra will be affected as the regulator increases compensation to various players along the value chain, reflecting what it described as today’s business realities.

Super petrol will increase by Sh7.80 per litre, diesel by Sh7.75 per litre, and kerosene by Sh7.67 per litre. Epra stated that the hike will be phased to help Kenyans absorb the shock.

Broken down, the price of a litre of super petrol will rise due to a Sh7.12 increase in the margin to be charged by oil marketing companies (OMCs) for each litre of the commodity, along with a Sh0.64 increase in transportation costs.

The OMCs’ margin will rise to Sh19.51 per litre of super petrol, up from the current Sh12.39 per litre.

The Sh0.64 per litre increase in transportation costs will ="https://www.standardmedia.co.ke/business/business/article/2001511817/fuel-prices-remain-unchanged">raise the margin for transporters< to Sh1.15 from Sh0.54 for products supplied within 40 kilometres of Nairobi, with other destinations varying depending on their distance from the depots.

This marks the first time in 14 years of government-regulated fuel prices that margins have been increased.

Fuel tankers play a critical role in ensuring the security of petroleum supply, collecting fuel from depots and delivering it to petrol stations.

Epra Director-General Daniel Kiptoo said the implementation would be phased to prevent a sudden surge in pump prices and timed to coincide with a fall in global prices.

The recommendations to increase some components of the ="https://www.standardmedia.co.ke/business/business/article/2001511795/budget-lobby-wants-fuel-levy-to-fund-electricity-connections">petroleum pricing formula< are outlined in the Cost of Service Study in the Supply of Petroleum Products, which Epra commissioned in December 2023.

“If you own a truck and you have signed a contract with an oil marketer, the OMC can only compensate you based on what Epra has approved. The last Epra set a price for transporters was in 2010.”

Consultants tasked with gathering stakeholder views conducted a public participation process last year before making the recommendations.

“We are looking for a mechanism to implement the recommendations in phases. We want to time it so it does not negatively impact consumers, ideally when petroleum prices are falling,” Kiptoo said, though he remained cautious about specifying when the phased implementation would begin.

The regulator is expected to publish maximum fuel prices for the March–April pricing cycle tomorrow.

Kiptoo noted that Epra is still reviewing data and will decide whether to start the phased introduction of higher margins on Friday.

He also highlighted that global prices have been declining.

“When you look at international prices, they have been coming down, and we see an opportunity to implement these recommendations without necessarily increasing pump prices,” he said.

“We are keen to ensure this does not ="https://www.standardmedia.co.ke/entertainment/explainers/article/2001456057/debunking-six-myths-about-petrol-prices-in-kenya">adversely affect consumers< while also compensating investors.”

“These margins are not absolute margins,” Kiptoo said, explaining that in addition to oil marketers’ profits, they are also meant to cater for OMCs operational expenses including staff, electricity as well as investments that the retailers are required to make to meet their licensing requirements.