A Review of the Nigerian Energy Industry

In Kenya, fuel price cuts too minimal to affect fares

16 January 2015, Nairobi – Commuters are unlikely to reap from falling fuel prices as public service vehicle operators remain adamant about reducing fares.

Matatu Owners Association chairman Simon Kimutai said operation costs for a PSV are so high, that the current cut in fuel prices is not enough to warrant a reduction in fares.

KenyaKimutai argued that an average PSV consumes between 30 to 40 litres of fuel a day, and the saving made for a day’s fuel purchase going by the latest price of diesel which is lower by Sh7.50 would translate to about Sh300 per vehicle.

Given that the average vehicle carries an estimated minimum of 400 passengers daily; he said, the passenger number divided by the cost would translate to a saving of Sh1.33 per passenger, a very negligent saving to pass on, argued Kimutai.

The MOA chair cited high operation costs in form of taxes, route fees, spare parts and maintenance costs which he said cancel out any benefits accrued by cheaper fuel.

“Corruption practices and gangs at various routes are also raising the cost of operations for us,” said Kimutai.

Despite Energy Regulatory Commission cutting fuel prices by the biggest margin since 2010 on Wednesday, only private motorists stand to gain with Super petrol now cheaper by Sh9.13 to retail at Sh92.88 in Nairobi.

Farmers echoed MOA complaining that diesel cost was still high. Kenya National Farmers Union chairman Musa Barno said diesel should retail at Sh65 for a substantial benefit to be realised.

Motorists Association of Kenya said it expected a much bigger drop than what was announced but said it is consoled by the fact that ERC has promiesed further cuts over the next three months.

Economic and financial Aly Khan Saatchu said: “Here in Kenya fuel price transmission is still lagging the extraordinary cratering of the oil price which is now well below $50.00 a barrel… the ERC and others were trying to work some expensive fuel through the system and hence held back on transmission of lower prices.”

A spot check by the Star showed commuters paid same fares, some even higher on the day the lower prices became effective.

Julius Kamau a matatu owner whose vehicle plies Kangemi-town route said a reduction will not be possible arguing he cannot determine whether he will gain from the cut.

“I cannot charge less since I do not hike the price when oil prices go up, however if other operators lower the fare I will be forced to” said Dave Maina a taxi operator at Westlands.

Kevin Otieno who lives in Huruma said he will enjoy cheaper kerosene but his transport expenses are high since matatus from his estate still charge Sh70 to town at peak hours.

Boda Boda operator Patrick Wambugu ruled out a fare cut unless “prices fall further to Sh50.”


– The Star

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