In the recent past, there have been debates from both the public and parliamentarians, on whether or not the Energy Regulatory Commission (ERC) should be disbanded. The ERC has been blamed for not acting in the interest of consumers, a concern brought about by the continuous upward trend in fuel pump prices.
Click here to read about trend in fuel pump prices
We decided to find out if the ERC is actually saving us money by establishing the relationship between the international prices of crude oil and the aggregate pump prices in Nairobi as provided by the Kenya National Bureau of Statistics. We used the prices of crude oil and pump prices for the 18 months before the ERC took over and used them to extrapolate the following 18 months. Our calculations are based on assumption that costs associated with refining, production, transportation and prevailing taxes remained constant.
The ERC first set fuel prices in Dec 2010. The graphs below show the prices before and after with the dotted line showing the date the ERC took Over. The red line shows the prices as they would have been if the fuel prices had been left to market forces.
Observations
From the graphs above, one can see that the ERC has kept the fuel prices of petrol and diesel below what they would have been without price controls. It is though important to note that our projected Kerosene market prices are lower than ERC’s capped prices.