In late June 2020, a consultative meeting between Tanzania’s oil marketing companies (OMCs) and the country’s Energy and Water Utilities Regulatory Authority (EWURA) was scuttled by police who stormed the venue with specific orders and names.
They had the names of people they wanted to accompany them: Total Tanzania’s MD Jean-Francois Schoepp, Puma Supply Manager Adam Eliewinga and Oryx’s representative August Dominick. The reason for their dramatic arrest, the Tanzanian authorities said, was because the oil firms represented by those arrested had allegedly been hoarding fuel products and thereby causing artificial shortages in anticipation of significant price increases and therefore better margins.
Before the arrests, the Tanzania regulator had threatened to revoke the licences of two oil marketers namely Moil and Olympic Petroleum and three filling stations over allegations of hoarding. Face with the threat of losing its licence, Moil issued a public apology and agreed to pay a fine of Tsh10 million (about Sh459,000).
As the claims of fuel hoarding were ending up in the embarrassing arrest of the three oil firm bosses in Dar es Salaam, in Kenya, supply disruptions were also happening. Super petrol was the most affected as oil marketing companies like Total restricted the quantities their dealers could access.
“Sometime in June, Total informed its dealers that there was shortage of fuel and that they would be rationing supply,” a dealer familiar with the matter told the Nairobi Law Monthly in confidence for fear of reprisals from the powerful oil marketer.
As the COVID-19 pandemic ravaged the world, global oil prices had plummeted significantly due to low demand, stay-at-home guidelines and cessation of movement imposed by different governments to varying degrees. Between June 15th and July 14th, the Energy and Petroleum Regulatory Authority (EPRA) had set the price of super petrol at Sh89.10 a litre in Nairobi, diesel at Sh74.57 a litre and kerosene at Sh62.46 a litre. This was an increase in prices from the previous month.
Within the industry, as countries began to loosen the COVID-19 restrictions as cases began to decline, there was expectation that fuel prices would go up by substantial margins.
For Kenyan oil marketers, the opportunity to cash in on the rising fuel prices became too tempting and thus the hoarding of fuel products began ahead of July 15th when EPRA would set the new prices. They wanted to hold onto fuel they had purchased at lower prices in June and sell the same at much higher prices in July.
At Total for instance, dealers were told that they could not get the quantities they were asking for. Even then, dealers had to purchase a certain quantity of diesel in order to be supplied with super petrol.
Around this time, and especially within Nairobi, some petrol stations reported running low on super petrol and others just didn’t have the product.
As the situation threatened to get out of hand, one dealer gathered courage and reported the situation to EPRA.
Cases of hoarding had been reported earlier in June especially in Western Kenya, which prompted EPRA to warn oil marketing companies against the vice.
“The Energy and Petroleum Regulatory Authority (EPRA) has received reports of artificial shortage of petroleum products in the country particularly in Western Kenya, despite the country being sufficiently stocked. Preliminary investigations indicate that a number of Oil Marketing Companies (OMCs) are deliberately holding back sales to non-franchised petroleum retailers otherwise known as independents, in anticipation for a price increase. This practice is tantamount to hoarding and is an offence under Section 99(1)(k) of the Petroleum Act No. 2 of 2019,” EPRA wrote to OMCs.
EPRA warned that the vice on conviction could result to a fine of not less than Sh1 million, or a term of imprisonment of not less than one year, or both.
“In addition, EPRA shall not hesitate to permanently revoke licences for companies or individuals found in breach of the above mentioned provision,” the EPRA statement added.
But it seems the warning fell on deaf ears and EPRA either became complicit in the scheme or just did not care because even after the situation was brought to their attention, nothing was done.
“According to EPRA regulations, OMCs are required to have at least 21 days of stock. This therefore means that cases of shortages resulting into fuel rationing should not arise. But we experienced it and EPRA did nothing yet they were aware,” a dealer told the NLM.
Indeed as the OMCs, with insider industry information, had anticipated, EPRA announced an increase in fuel prices for July 15th and August 14th. Super petrol went up by Sh11.38 a litre, diesel by Sh17.30 and kerosene remained the same except for adjustments for under recovery of Value Added Tax in the previous pricing cycle.
With the significant upward price changes, all oil products became available and rationing stopped. And so, unlike Tanzania which was arresting OMC bosses for disrupting distribution.
For Total, however, for unexplained reasons, it suffered stock outs of diesel in September. The OMC acknowledged the stock out in a communication to dealers on September 14, 2020, when it advised on how to manage a situation where sludge could be mixed with fuel and damage vehicles.
On September 16, 2020, Total this time sent out a blanket ban on dealers from speaking to the media. “Please take note that whenever there is an industry crisis or any form of incident at the station level, it is strictly forbidden for any dealer/staff to address the media in whatever manner or make comments on behalf of the company,” the communication stated.
It is not clear what prompted the warning on engaging with the media. But it is around this time that the company was experiencing diesel shortages, the earlier rationing of fuel and there had also been complaints among dealers of arbitrary fees and rent increases.
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