Kenya is grappling with a significant surge in fuel prices, with diesel reaching a record high, despite government efforts to cushion consumers. The energy regulator announced these sharp increases, reflecting a challenging global oil market. This market is exacerbated by ongoing international conflicts. Citizens face higher costs for daily commutes and essential goods, impacting household budgets and the broader economy.

What Happened?

Kenya's Energy and Petroleum Regulatory Authority (Epra) announced steep rises in petroleum costs in its latest review. Diesel price jumped by 40 Kenya shillings, reaching 206 shillings ($1.6; £1.2) per litre. Petrol prices also increased by 28 shillings, reaching 206 shillings per litre. Epra attributed these adjustments primarily to higher global oil prices and increased shipping costs, influenced by the conflict involving Iran.

These price hikes occur despite the government's attempt to mitigate impact on consumers. They cut Value Added Tax (VAT) on fuel from 16% to 13%. This tax reduction is scheduled until July. The new fuel prices last until May 14, when the next regulatory review is due. Fuel shortages have also emerged in various parts of the country. The government maintains sufficient stock levels and blames some companies for hoarding supplies, complicating the supply chain.

The nation is embroiled in controversy over an allegedly substandard fuel consignment imported last month. This shipment reportedly arrived outside official arrangements and at a significantly higher cost. Concerns grew that this inferior fuel might have been blended with government stocks. This revelation sparked public anger and demands for accountability. The government had previously cancelled the consignment due to quality and cost. It barred oil marketers from selling it. This issue led to the arrest and resignation of senior energy officials and remains under investigation. Epra confirmed this disputed consignment was not factored into the new price computations.

Key Highlights

Kenya significantly raised fuel prices; diesel rose by 40 shillings to KES 206 per litre.
Petrol prices also climbed by 28 shillings, reaching KES 206 per litre.
Hikes are due to soaring global oil prices and shipping costs, influenced by the conflict involving Iran.
The Kenyan government reduced fuel VAT from 16% to 13% until July to ease consumer burden.
Reports of fuel shortages persist; the government blames hoarding by some companies.
A controversial, allegedly substandard fuel consignment imported last month sparked outrage and led to official arrests.
Epra confirmed the disputed consignment was not included in the latest price adjustments.

Why Does This Matter?

For ordinary Kenyans, sharp fuel price increases directly translate into a higher cost of living. Fuel is critical in nearly every sector, including transportation, agriculture, and manufacturing. Higher fuel costs mean increased public transport fares and more expensive goods and services. They also place a greater burden on household budgets already strained by economic pressures. Businesses, particularly those reliant on logistics, will face increased operational costs. This could lead to inflation and potentially slow economic growth. While the government's VAT cut offers some relief, it is insufficient to fully offset the current record price surges, leaving many concerned about future economic stability.

Globally, these price rises underscore the far-reaching impact of international conflicts on energy markets. The US-Israel war with Iran, which began on February 28, has significantly disrupted global oil and gas supplies, especially through vital shipping routes like the Strait of Hormuz. Although a conditional two-week ceasefire was signed, concerns remain about a deepening energy crisis. Kenya is not alone in these challenges. Other African nations like South Africa, Zambia, Namibia, and Ghana have implemented similar tax cuts or measures. South Sudan resorted to electricity rationing, and Ethiopia prioritized sectors to manage the crisis. This highlights the widespread nature of this global energy challenge and the urgent need for stable international energy policies.