Fuel retail prices in Kenya are a cause of anxiety to many motorists due to a myriad of factors including but not limited to pricing and availability which tend to go together many at times. The worst kept secret in the country has been the favorable rates enjoyed at the pump down in the Coast.
Due to peculiar characteristics of fuel, different regional markets can be effectively segregated in most cases, the so called “third degree of price discrimination” is applied. The Kenyan market for fuel sees fuel being sold exclusively through very few vertically integrated chains, which belong to several major brands. This causes a mark up in price to consumers who are further up in the country to cater for transportation costs.
However, this is all set to change if a proposal by the Energy Regulatory Commission (ERC) is adopted by the government. This plan benchmarks a similar price harmonization plan effected in Ghana, Zambia and South Africa. The report seeks to enhance price harmonization among consumers across the board.
The public is encouraged to offer its input before the report is presented to the Energy Cabinet Secretary in a window period which will run for two weeks. The implementation of the report is expected to take six months thereafter. Decision making for different gasoline stations in different local markets depends to a certain degree on conjectures about behavior of rivals, located in the same area.
Experts have however stated that the only way this proposal can work is through price controls since Kenya is a free market and price fixing would dissuade investors looking to set-up shop in the country.