Looming fuel crisis as oil marketers run out of stock
3 min read
Fuel crisis looming in the country as oil marketers run out of stock as a result of the dollar shortage
Fuel crisis looming in the country as oil marketers run out of stock as a result of the dollar shortage.
Customers are already dealing with new fuel shortages as a result of major oil marketing firms (OMCs) in Nairobi running out of petrol and turning away drivers due to severe cash flow issues brought on by the dollar shortage.
Several petrol stations in parts of Nairobi had run out of petroleum products from the weekend, with those owned by Vivo Energy among the hardest hit.
According to reports, several outlets by Vivo under the Shell brand had run out of super petrol, with attendants giving motorists the option of buying the company’s V-Power brand.
Insiders in the industry revealed that the situation is attributed to a dollar shortage.
However, Petroleum Outlets Association of Kenya (POAK) Chairman Martin Chomba said there’s sufficient fuel at the depots.
“There is sufficient fuel at the depots but the major oil companies are not evacuating it because they do not have sufficient dollars,” said Martin Chomba.
Kenya is currently battling an acute shortage of US dollars primarily due to pressure exerted by external debt repayments.
Data from the Central Bank of Kenya (CBK) released on Friday shows forex reserves dropped to $6.6 billion (Sh845.46 billion) on March 2 from $6.86 billion (Sh878.76 billion) on February 23.
This translates to 3.69 months of import cover, which is below the set threshold of four months and comes despite CBK Governor Patrick Njoroge constantly downplaying the shortage.
Demand for forex has shot through the roof in recent months as importers seek more dollars to finance imports owing to higher global prices of fuel, food products, cooking oil, steel, and other imports.
“Yes, talk to the big OMCs. It is a crisis,” said an executive of a smaller oil marketing company who requested anonymity.
The Energy and Petroleum Regulatory Authority (Epra) has also failed to fully withdraw the subsidy on diesel which has compounded the cash-flow woes of the OMCs.
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The OMCs have been borrowing to fulfill their cash needs for fuel imports, but muted fuel sales owing to the tough economic conditions that have seen many motorists park their cars in favour of public transport have compounded their woes.
President William Ruto’s government has resorted to government-to-government procurement of fuel, which will see state-owned Gulf companies supply fuel to one local OMC of their choice, who will in turn distribute it to other local players.
The government has already floated a tender of nine months for the fuel supply through the new arrangement, which is a temporary move away from the Open Tender System where some 112 OMCs compete to procure fuel on behalf of the others.
The government says the new system will help to reduce pressure on forex reserves considering that in the government-to-government fuel purchasing, payment for the cargo will be made after six months compared to the current system where the firms have to pay for the cargo every week.
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