Tuesday, January 10, 2012

ERC - Regulator or Speculator?

KenolKobil used to provide its 'understanding' or forecast on where the price of fuel is headed... Since the trajectory of prices was on the ascent i.e. going up on a monthly basis... Do remember that fuel is price controlled in Kenya...

Read Kenya's Oil Industry - The Unholy Trio

There were 3 main reasons:
1 - Oil prices were rising in the International Market
2 - The Kenya Shilling was falling like a rock vs US$ (in which currency oil is priced)
3 - The inefficiencies of government controlled entities like Kenya Pipeline Company & Kenya Petroleum Refineries.

In August 2011, the CBK governor bitched about KenolKobil's forecasts saying it was fueling inflation. KK has about 25% market share of the petroleum industry. How does he attribute galloping inflation to a single OMC?

...as Central Bank of Kenya (CBK) Governor Njuguna Ndung'u warned that the monthly fuel forecast by KenolKobil was putting pressure on the currency market as players rush to secure dollars on the projections.
"People rush to buy dollars when one company says prices will increase by certain margin on the understanding that they will get them cheaply," said Prof Ndung'u.

So ndungu thinks people are idiots? The KES continued dropping to 107 even after KK was 'banned' form forecasting prices... Seems the problem was not KK but the ineptness of the government!

Then the PS (Patrick Nyoike) in the Ministry of Energy who seems to have a bone to pick with KK... chimed in... http://allafrica.com/stories/201108150085.html & I quote:

 Energy permanent secretary Patrick Nyoike on Saturday said that the government had asked KenolKobil to stop its monthly forecasts. He said the forecasts had seen some marketers hoard fuel in anticipation of higher prices.
"We have stopped Kobil from announcing price changes because that's the work of the regulator and not market participants," said Mr Nyoike, adding that the forecasts had spurred speculation in the oil market and led to the persistent fuel shortages. Prices are normally reviewed on the 15th day of every month.

So let's get this straight... nyoike thinks KK's announcement made OTHER OMCs hoard fuel... Are these OMCs idiots? They probably know what's coming down the pipeline too! Remember this is the other 75% of the petroleum market which includes government owned & controlled National Oil Corporation of Kenya (NOCK).

Fast forward to Jan 2012 >>>

So after all the hot air emitted by nyoike in Aug 2011, it turns out he (& the ERC) decided it was his role to 'forecast' fuel prices BEFORE all the calculations were completed! The ERC is a regulatory body not a forecasting/polling/predicting entity.


When the ERC (which sets fuel prices) & PS of MoE makes such claims, it can trigger stock-outs at Fuel Stations who may hold off on buying fuel at the 'higher' prices. Why should they suffer losses by buying pricier fuel when prices will drop in a few days as indicated by the MoE/ERC?

I guess even in the new Kenya, there are First Among Equals... Don't do what I do...

Or the MoE & ERC may have some other nefarious plan up their sleeves to scam the Kenyan public?
Kenya had the Triton/KPC scam which KPC & MoE (nyoike & murungi) washed their hands off...
Kenya had the KPC scam where the pipeline expansion was sub-par & delayed...

Even some bloggers were gagged... ColdTusker BANNED from predicting scams