Kenya Fuel Prices Rise Sharply Despite Tax Reduction Amid Iran War

Kenya has seen a marked increase in petroleum prices, with diesel costs climbing by 40 Kenya shillings to 206 ($1.6; £1.2) per litre. Petrol prices also rose by 28 shillings, reaching a comparable level. This adjustment follows the energy regulator’s latest assessment, which attributed the hikes to higher global oil and shipping expenses. Notably, the government reduced the value added tax on fuel from 16% to 13%, yet prices still surged.

The updated pricing structure will remain in place until 14 May, when the next review is expected. While the government maintains that fuel reserves are adequate, it has accused certain suppliers of stockpiling to create scarcity. Reports of shortages have intensified, but officials insist there is enough supply to meet demand.

Controversy Over a Questionable Fuel Consignment

A recent dispute involving a shipment of fuel imported outside regular government agreements has sparked public backlash. This batch, reportedly of lower quality and higher cost, was allegedly blended with existing government stock before entering the market, fueling accusations of mismanagement. Authorities had earlier stated they canceled the consignment due to its quality and cost, and prohibited oil traders from selling it. The controversy led to the arrest and resignation of senior energy officials, with the matter still under scrutiny.

“The consignment was halted because of its quality concerns and elevated cost, and we barred marketers from distributing it,” stated officials.

On Wednesday, the Energy and Petroleum Regulatory Authority (Epra) clarified that the contested shipment was not factored into the current pricing calculations. This pricing surge coincides with a global fuel crisis triggered by the US-Israel conflict in Iran, which began on 28 February. Despite a conditional two-week ceasefire signed last Wednesday, including the reopening of the Strait of Hormuz—a vital oil and gas transportation corridor—concerns persist that the crisis could worsen.

Oil shipments through the strait have remained halted since the conflict started, disrupting supply chains. To mitigate the impact, nations like South Africa and Zambia have introduced tax cuts, while others have implemented measures such as electricity rationing and sectoral prioritization. Kenya’s VAT reduction is set to continue until July, alongside similar actions in Namibia, Ghana, and South Sudan.

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