Inside Kenyan Government`s Plan to Control Gas Prices

In a bid to control gas prices in the country, the government plans to import 30% of cooking gas through the National Oil Corporation of Kenya.

The price of gas has recently been at an all-time high and the plan will force private importers to lower the cost of liquefied petroleum gas (LPG) and eventually retail prices.

This plan comes after the review of regulations that reserve 30 percent of cooking gas imports to the State corporation and influence market prices.

The corporation`s main purpose is to stabilize and influence fuel prices but has recently been forced to follow the directives of private importers.

Cooking gas prices are at their highest level in Kenya`s history. This is as a result of the imposition of value-added tax (VAT) and the search for higher precincts by dealers following the increased price rate of crude oil in the wake of the Ukraine-Russia invasion.

In the Draft Petroleum (Importation) (Quota Allocations) Regulations, 2022, the Energy and Petroleum Regulatory Authority (EPRA) said, “The Petroleum Products Quota Allocation shall be as set out in the First Schedule and the purpose of the quota allocation will be to ensure price stabilization in an unregulated pricing regime.”

Prices of petrol, diesel, and kerosene are reviewed and adjusted on the 15th of every month whereas cooking gas prices are not controlled. Currently, the 13-kilogram cooking gas costs Ksh3, 400 from Ksh2, 250 in June after the government imposed a 16 percent tax at the start of the new financial year, pushing the commodity out of the reach of most households.

Gas imports from Nation`s Oil will be stored at the new Kipevu Oil Terminal, which is almost complete. Its construction started in 2019 and the facility is expected to have the capacity to handle four vessels of up to 100,000 metric tonnes and an LPG line upon completion.

The facility will allow the country to issue an open tender system (OTS) for gas imports and is meant to influence gas prices through the control of wholesale prices.

Under the OTS, the government will give one oil marketer the right to import gas in bulk every month on behalf of the entire industry and enjoy huge discounts, like diesel, petrol, and kerosene.

Oil prices rose after Russia invaded Ukraine, with the price of Brent crude oil (the global standard for prices) hitting a 14-year high of $139 per barrel at some point.

However, in the past few days, the price of oil has dropped due to fears that the European Union would follow the US and Canada in banning Russian oil. Brent crude went down to $99.95 per barrel by Wednesday.

Article by Charity Nyadzua