The government, through Energy Cabinet Secretary Opiyo Wandayi, has warned that oil marketing companies risk going out of business if fuel prices are revised too sharply downward.

🇰🇪 Breaking It Down

Speaking in an interview on Monday, June 15, CS Wandayi said that fuel prices are not determined arbitrarily but through a scientific process.

According to the CS, fuel pricing is guided by a structured regulatory process aimed at balancing consumer relief with the sustainability of oil marketing companies

“If we are not careful and we make it uneconomical for the oil marketing companies to remain in business, we risk disrupting the entire supply chain and causing serious havoc in the economy.” CS Wandayi said.

📌 What You Need to Know

Wandayi noted that the Energy and Petroleum Regulatory Authority (EPRA) undertakes periodic Cost of Service Studies to determine the actual cost of delivering petroleum products and to guide the setting of reasonable margins for industry players.

He said the most recent review, conducted in recent years, informs the current pricing structure.

The CS also clarified that while the official pump prices are lower due to government interventions such as subsidies and tax adjustments, the underlying or “true” cost of diesel is estimated at around Ksh 259 per litre before such interventions.

Additionally, he mentioned that there is a need to balance the interests of all stakeholders and ensure that oil companies remain in business.

The CS reiterated that fiscal measures, including adjustments in VAT, the Road Maintenance Levy, oil marketing margins, and the use of the Fuel Price Stabilisation Fund, have helped reduce retail prices for consumers.

Among the key deductions highlighted are changes in fuel-related taxes and levies, including adjustments in VAT, reductions in certain per-litre levies, and the stabilisation mechanism that cushions local prices from global oil shocks.

📰 Source: Kenyans.co.ke