Tariff Setting : Petroleum

Section 5 (a)(ii) of the Energy Act 2006, grants the Commission the mandate to regulate importation, exportation, transportation, refining, storage and sale of petroleum and petroleum products under the downstream sub-sector

The Commission undertakes retail pricing of petroleum products (Diesel, Super Petrol and Kerosene) as stipulated in the Energy (Petroleum Pricing) Regulations, 2010.

The Pricing Regulations introduced a formula that ERC uses in determining the maximum retail pump prices of Super Petrol, Regular Petrol, Diesel and Kerosene (the Regulated Products).

          WHOLESALE PRICES

Pw = Cu (1+ Lp + Ld)+ K (1+ Ld) +mw

Where—

  • Pw = the maximum wholesale price for super petrol, kerosene or Automotive diesel;
  • Cu = the weighted average cost in shillings per litre ex the Kenya Petroleum Refineries Limited (KPRL) and ex Kipevu Oil Storage Facility (KOSF).
  • K = the transportation cost from Mombasa to the nearest wholesale depot, which is made up of x percent of pipeline tariff (Kpt) and (100 – x) percent of road bridging cost (Krd) as set out in the First Schedule.
  • Lp = the allowed losses in the pipeline as set out in the Second Schedule
  • Ld = the allowed losses in the depot as set out in the Second Schedule;
  • mw = the allowed oil marketing company’s gross wholesale margin as set out in the Third Schedule.
           RETAIL PRICES

For super petrol, kerosene and automotive diesel, the Pricing formula used is:

Pr = Pw + mr + z

Where,

  • Pr = the maximum retail pump price of super petrol, regular petrol, kerosene or Automotive diesel applicable, in shillings per litre;
  • mr = the allowed maximum retail gross margin as set out in the Third Schedule;
  • z = the delivery rate from the nearest wholesale depot to a retail dispensing site in Shillings per litre as set out in the First Schedule.

While determining the wholesale and retail prices for petroleum products, Economic Regulations incorporates the costs as indicated in the first and second schedule of the Energy (Petroleum pricing) Regulations, 2010.

The retail pump prices for Super Petrol, Automotive Diesel and Kerosene are published monthly on 15th of every month.