Oil dealers in talks to shift foreign exchange losses to customers
Oil dealers plan to pass foreign exchange losses to customers, a move that could see fuel prices increase
Oil dealers plan to pass foreign exchange losses to customers, a move that could see fuel prices increase.
In a move that could result in price increases, oil marketers are pressing for an agreement to protect themselves against foreign exchange losses and pass the same along to customers.
The marketers have been in talks with the government on how to recover past losses linked to the depreciation of Kenya shilling against the dollar and strike a deal on how to pass such future losses to customers.
The strategy has been revealed by Rubis, a French multinational with operations in Kenya, in its most recent trading update for the first quarter of the year.
Oil marketers are vulnerable to foreign exchange losses due to the “application or the non-application” of the Energy and Petroleum Regulatory Authority (Epra) pricing formula, according to Bruno Krief, chief financial officer of Rubis SA.
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“The industry and the petrol distributor as a whole are on the verge of finding an agreement with the Kenyan government to retrieve this loss, which is specifically linked to the forex to the precision of the shilling versus the US dollar,” said Mr. Krief.
“But then for the future, fundamentally the forex risk has to be paid by the customer to some extent, and never by the petrol distributor. So, the government is conscious of that.”
The push, if allowed, could see prices rise further.
The oil dealers want the government to strike a balance between their interests and those of customers in an environment where the Kenya shilling has lost about a fifth of its value in the past 12 months to average above 143.60 units to the dollar.
The Epra has, however, been reflecting an even weaker position with its July 14 figure coming in at Sh144.48 per US dollar.
The weakening shilling has meant that oil marketers pay more to import oil products.
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