Kenyans are bracing for higher transport and commodity costs after the Energy and Petroleum Regulatory Authority (EPRA) announced a sharp increase in fuel prices for the May 15 to June 14 pricing cycle.
In the latest review, petrol prices rose by Sh16.65 per litre while diesel recorded an even steeper increase of Sh46.29 per litre. Kerosene prices remained unchanged.
The adjustment pushed the price of petrol in Nairobi to Sh214.25 per litre, while diesel climbed to Sh242.92, sparking concerns among motorists, transport operators and businesses already struggling with the rising cost of living.
Reinstatement of VAT on Fuel
A major factor behind the latest increase is the reinstatement of the 8 percent Value Added Tax (VAT) on petroleum products.
According to EPRA, the current prices now fully incorporate VAT, revised excise duty charges adjusted for inflation, and other statutory taxes under recent tax laws and legal notices issued by the government.
Fuel taxes form a significant portion of pump prices in Kenya, meaning even a small tax adjustment can result in noticeable increases at filling stations.
Analysts say the return of VAT on fuel has had an immediate impact on retail prices, especially at a time when international fuel costs are also rising.
Global Oil Prices Continue to Rise
EPRA also attributed the increase to a sharp rise in global fuel prices during the review period.
The regulator noted that the average landed cost of imported Super Petrol rose from $823.27 per cubic metre in March to $906.23 in April. Diesel recorded the largest jump, increasing from $1,073.82 to $1,291.98 per cubic metre.
Kenya relies entirely on imported refined petroleum products, making local fuel prices highly sensitive to international market fluctuations.
Global oil prices have been affected by ongoing geopolitical tensions, supply disruptions and increased global demand, factors that continue to place pressure on fuel-importing countries.
Why Diesel Prices Rose More Sharply
Diesel experienced the largest increase because international diesel prices rose significantly higher than petrol prices during the review period.
The impact is expected to be felt across multiple sectors of the economy since diesel powers public transport vehicles, cargo trucks, factories and agricultural machinery.
Transport operators are already warning that matatu fares and cargo charges could rise in the coming days as businesses attempt to absorb the higher fuel costs.
Economists also caution that increased diesel prices often translate into higher food prices because transportation costs affect supply chains from farms to markets.
Government Subsidy Cushion Not Enough
Although the government allocated approximately Sh5 billion from the Petroleum Development Levy Fund to cushion consumers, the subsidy was not sufficient to offset the sharp rise in global prices and taxes.
EPRA indicated that the stabilization measures mainly targeted diesel and kerosene to prevent even steeper increases.
The Kenya shilling remained relatively stable against the US dollar during the review period, averaging about Sh129.56, but this was not enough to shield consumers from the rising international fuel costs.
Pressure on Cost of Living
The latest fuel price hike is expected to increase pressure on household budgets and business operations across the country.
Higher transport costs are likely to affect the prices of food, consumer goods and services, potentially pushing inflation higher in the coming weeks.
With fuel prices now at record highs, many Kenyans are expected to face increased financial strain as the cost of daily living continues to rise.
