Fuel crisis highlights important role of independent distributors

Long queues at petrol stations and the trading of accusations between government and oil marketers has been the order of the day amid the persistent shortage of fuel. The government insists there is enough fuel to sustain the country for the next 22 days.

This raises the question, why is this precious commodity not reaching the consumers? While all eyes have been focussed on big players like Rubis and Vivo, one of the key players that have been kept on the fence is the Kenya Independent Petroleum Distributors Association (Kipeda).

Rural areas and surrounding towns have been the most hard hit although the public outcry makes the fuel shortage to look like a Nairobi problem. Many service stations in the rural areas, run by independent distributors who usually depend on depots in Nairobi and Mombasa, have been forced to shut operations.

If we are to believe the government’s explanation and the fact that many trucks continue to be seen ferrying fuel to select stations, one question crops up: Why hoard the fuel at the expense of independent distributors and hurt consumers?

Supplying other countries when Kenya is suffering is more of economic sabotage than a business case and perhaps a stark reminder that the role of independents cannot be ignored.

Achieving a level playing field within the petroleum sector has been a challenge for long. This speaks to the limitation of the country’s infrastructure in terms of fuel storage and transportation. The government recently disclosed that 60 per cent of the local oil market is owned by three companies. But the three are mainly concentrated in cities and large towns.

In short, the country cannot afford to lose independent oil marketers especially considering that devolution has been opening up economic activities in once sleepy commercial centres.  

While it remains a good thing to subsidise prices, the State is also to blame by triggering shortage through a series of events that started by delaying payments to the oil marketers.

Many pundits who have waded into this discourse agree that the delayed payments, running into billions of shillings, have only served to give a perfect excuse for these oil marketers to benefit out of a crisis.

Let us not forget that independent distributors were allowed by the State from 1995 for a very crucial role: To serve areas where major oil firms had ignored. If claims by Kipeda Chairman Joseph Karanja are anything to go by, starving the independents of fuel could be a plan to weaken these small players and then buy them out.

In 2012, when Kenya experienced fuel shortage, major players blamed the independents of taking up all the space on the infrastructure and pipes, making importers unable to import fuel.

The relationship between the oil majors and the independent distributors should be one that should interest Competition Authority of Kenya since it borders on abuse of market power.

Before the fuel shortage, the main concern was the rising cost. When the dust settles, the government needs to relook its taxation regime for petroleum products. We have subsidy in the first place because government got greedy on taxing these products.