Though the price of oil always gets in the newspapers around the world whenever it is very low and very high because of the macroeconomic impacts and geopolitical implications, it is never something that affected me personally. Fortunate enough that extra levies on flights or slightly higher petrol prices did not make a big dent, I have not had to change my lifestyle, though it doesn't involve driving much anyway, with only short trips to school/work and around town at weekends usually.
This all changed a couple of weeks ago in Kenya. The price of petrol here is fixed by the government and changed every month based on its actual cost plus allowable margins for those transporting and selling the stuff. A year or two ago the government began implementing a mechanism to charge an extra tax on petrol (on top of the regular tax) that would go into a special fund that could be used to subsidise petrol when prices were very high. A great idea, particularly when prices collapsed when COVID-19 first hit, but one that sets high expectations for the public which are hard to meet during a protracted high oil crisis due to the Ukraine War and general budget, foreign exchange and exchange rate crises in the Country due to the Country's large debts, high import bill and slow economic growth.
It also means that a market that is already tightly government controlled becomes even more intertwined with the government's ability to manage a market well and to respond quickly and efficiently. So setting prices infrequently when prices are changing a lot is a problem. Promising to reimburse the petrol companies but taking a long time to pay them, if at all, is a problem. Setting expectations but then changing those expectations by not being able to guarantee subsidy programs into the future, due to lack of funds, or possible changes in policies/subsidy amounts, is also a problem.
And when there are these problems there can be unforeseen consequences that cause even more problems. Such as (or so it seems from the media) the petrol companies choosing to sell more petrol to neighboring landlocked countries (who get their petrol through Kenya) instead of selling as much in Kenya, or holding onto some supplies for a few days extra here and there until they get paid their subsidies, or the monthly price review changes what they can sell the stuff for.
The result is a lack of petrol at petrol stations, no-one knows when there is petrol or where, and no-one has confidence if there will be petrol tomorrow or the next day... Hence mad rushes to get petrol whenever there may be some available and very long queues for petrol. Since petrol stations don't have much space to accommodate long queues then the queues back out onto the roads. This first affected me 10 days ago when I was on a business trip and driving on the main highway north, and since big highways need petrol stations, and that stretch of the road is only single lane (at the moment, it is changing thankfully), then the queues block the road. And in Kenya no-one likes to sit in a queue in the best of times, always deciding to overtake to make a second lane, or a third lane, or a fourth lane on the pavement on the inside.... But certainly when most cars are not actually needing fuel, being stuck in a queue on a highway behind the cars queueing for fuel is not great.
We managed to find a side route off the highway which only slowed us down about 10 minutes, and we were probably quite lucky that the queues must have only just started because within another 20 minutes or so they may have been so bad the diversion would not have worked. Another hour or two later we had the same problem again. When we came back the next day we were able to get fuel very easily because our car was the only one that wanted diesel! The police were out at all the police stations and the highways trying to help manage the queues with various one way systems and in some cases requiring people to park elsewhere and instead queue on foot with a gerry can (I think fuel was also being rationed). In some petrol stations we saw hundreds of people lining up with their gerry cans at one petrol station, and at the next petrol stations dozens of motorbikes queuing, and at the next, dozens of cars... (it seemed that the police had organized it that way).
Then back in Nairobi when I saw a petrol station with petrol one lunchtime I just went it and topped up even though I didn't really need petrol... Just in case. And now, more than two weeks into the crisis, I am wondering whether to drive across town during the holiday weekend and use up precious fuel, or go out of town for a couple of days... Or not risk getting stuck somewhere! Meanwhile the traffic jams in Nairobi from the queues coming out of the petrol stations have been crazy; routes need to be planned to avoid any road near a petrol station! Not that most people actually were queuing for fuel, but they were stuck in the fuel queue on the road.
The government has of course responded to the public pressure and started talking about arresting the fuel companies' leadership for one reason or another whilst assuring everyone there is enough fuel, it is just not being released properly. Of course this ignores the fact that because no one really trusts all these statements, nor knows what will happen in the future, the general feeling of panic buying still continues and makes everything worse. Prices were supposed to go up 25% or so last night in the monthly price review as it was expected the government could not continue with the subsidy, but in the end the government has committed to conintue subsidising.
Where the money will come from I don't know as I don't think that there is anything left saved up from when prices were low, and I don't think subsidising fuel using general tax revenues is a good idea. It would be better to spend that money on direct subsidies to the poor or specific subsidies for fuel for public transport to keep those prices from rising, rather than subsidising fuel in general that is mostly only used for the middle and upper classes (though apparently it could make sense to subsidise diesel that is mostly used in agriculture, industry and electricity generation).
The latest this morning is all about the promises for the market to be back to normal within 3 days, whilst the CEOs of the local petrol companies are being investigated for breaking the law. And I may just dig out my bike :)
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