Date: Sun, 18 Jan 2009 18:35:06 -0600 [06:35:06 PM CST]
From: People Foundation
Subject: Re: Oil & Governmen
We need to privatize KPC and National Oil corporation and install good reguatory framework. Ask Hon Kimunya what he thinks. He is the only sensible dude in parliament.
—
People Foundation, Inc,
Social Transformation Advocacy Group
775 River Oaks Parkway
San Jose, CA 95136
On Fri, Jan 16, 2009 at 7:43 AM, odhiambo okecth wrote:
The Government always looks impotent when it comes to fixing oil prices yet the National Oil Corporation, being a government body and a large distributor of oil and oil products, can effectively help the Government control the pump price of oil products.
If the Government was ever serious about the prices, National Oil Corporation should lead by example. Nock should reduce the pump price to the levels that the Government want, then all the other major players in the oil industry will have no option but to do the same.
In the obtaining situation, it is the other players that normally take the lead in such reductions. What we come to realize is the active connivance of people in Government in planning for sleaze.
If the Government officials put in as much effort as they put in planning sleaze, Kenya would be far much better off. We would have save the kind of moneys going to waste in grandiose projects such as Goldenberg, Anglo Leasing, Nyayo Wards, Maize 52/72, Tritongate, et al.
Can we ask our Government to put in much effort in service delivery, just as they are puuting in much efforts at ripping off Kenya.
Odhiambo T Oketch,
Komarock Nairobi
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http://blog.jaluo.com/?p=1844
Date: Fri, 16 Jan 2009 05:43:27 -0800 [07:43:27 AM CST]
From: odhiambo okecth
Subject: Oil & Government
The issue of petrol prices and the policy that our government should adopt is an example of the many issues that are not well understood by most commentators. On one hand Kenyans would like the fuel distribution and integrity systems to be efficient and of the highest quality and yet pay as little as possible for it at the pump. Here are three ways you would approach the issue as a government.
First, the lowest price can be obtained by nationalising the petroleum business. No multinationals, no private sector investors just governement corporation/monopoly (just like KPLC in power distribution) involved in importing and distribution. This is ofcourse not economically feasible or efficient – coruption and waste in government run systems is now a cliche.
Another alternative is to re-introduce price controls and force oil marketers to meet a maximum price – as in South Africa. This is generally inneficient because investors will only invest in the business if they can be guaranteed/or at least be sure of sufficient margins above the risk free interest rate. The risk is fuel shortages, lower quality etc. The level at which prices will have to be set will need to be high enough to satisfy / justify investors costs and margins. Which will mean Kenyans paying more at the pump – back to square one.
The government could also liberalise the sector – ensure that there are low barriers to entry/exit and allow free competition. Market forces then determine the prices and only the companies with the best resources, know-how and risk appetite succeed and survive. This is efficient and not suprisingly is the model applied in Kenya.
The common argument against this model is that the oil companies having acquired significant market shares would act as a cartel and fix high prices. The solution currently selected by the government to deal with the “cartels” is to form NOCK a government corporation to compete with them. In my view the best approach is to have a commission or authority with powers and mechanisms to investigate and punish cartel-like behaviour and enact regulations that make this behaviour extremely risky.
Having studied the published financial statements of the two major petroleum companies that are quoted on the Nairobi Stock Exchange (Kenya Oil Company and Total Kenya) over several years I have noted that none of the companies have been able to achieve a return more than 10% of the capital employed. One would expect that if there was clear and incontrovertible evidence of price fixing it would turn up somewhere in the financials.