Last week, Government announced plans to upgrade fuel reserves capacity from 30 million litres to 150 million by 2017.According to the Ministry of Trade and Industry, on average, the country consumes 205 million litres of fuel annually with an average consumption of 17-20 million litres per month which is projected to grow at annual rate of 10.1%.It is common for fuel prices to rise largely because of interruptions in the supply chain.For example, the December 2007 political crisis in Kenya literally paralysed the economies of its land locked neighbours.In 2011, oil topped $100 a barrel over Libya unrest and subsequently drove pump prices up in regional countries.Slight disruptions of transport at the Mombasa port and glitches at the oil pipeline system from Nairobi have also previously pushed oil prices up. The impact of such interruptions would be minimal if we had more reserves filled to capacity.Once the government has enough fuel reserves, it will help to cushion the country from such abrupt shocks.Also, the government currently spends a lot of money because it purchases few litres of fuel, yet it’s cheaper to buy in bulk.This project should be accorded the urgency and support it deserves, by setting up the oil product law, which will set guidelines for the oil trade.It should also urgently negotiate removal of hurdles related to weigh bridges and non tariff barriers that traders say limit them from importing much more fuel.Fuel and energy are priority issues the world over and should be treated with urgency.
