Kenya fuel prices hit record high as diesel surges amid global oil supply fears

Kenya has raised fuel prices for the second straight month, pushing diesel to a record high and worsening pressure on households and businesses already battling rising living costs.

• Kenya has raised diesel prices to a record Sh242.92 per litre, marking its second major fuel increase in weeks amid global oil supply fears.
• The sharp rise is expected to push up transport fares, food prices and manufacturing costs in East Africa’s largest economy.
• The increase comes as Middle East tensions disrupt global oil markets and expose African economies heavily dependent on imported fuel.
• Several African countries, including South Africa, Namibia and Zambia, have already cut fuel taxes to shield consumers from rising energy costs.

The latest increase reflects the growing impact of global oil supply disruptions linked to escalating tensions in the Middle East, which have rattled energy markets and driven up crude prices worldwide.

In new prices announced on Thursday, Kenya’s Energy and Petroleum Regulatory Authority (EPRA) said diesel prices jumped by 23.5 per cent to 242.92 Kenyan shillings ($1.88) per litre from 196.63 shillings.

Petrol prices rose to 214.25 shillings per litre from 206.97 shillings, while kerosene remained unchanged at 152.78 shillings.

The new prices will remain in force until June 14.

The hike comes barely weeks after another major increase in pump prices, deepening concerns over inflation in East Africa’s largest economy, where consumers are already struggling with expensive food, transport and electricity costs.

Kenya imports nearly all of its refined fuel products through government-to-government supply deals with Gulf oil firms, leaving the country highly exposed to global energy shocks.

Global oil prices surged in recent months after renewed tensions around the Strait of Hormuz, a key shipping route that handles a significant share of the world’s crude exports, raised fears of tighter supplies and delivery disruptions.

Brent crude climbed above $126 per barrel in April, reaching its highest level in about four years.

The Kenyan government said diesel and kerosene prices were still being partially subsidised despite the latest increase. Diesel currently carries a subsidy of 15.67 shillings ($0.12) per litre, while kerosene receives a subsidy of 98.60shillings ($0.76) per litre.

Petrol is no longer subsidised as authorities try to reduce pressure on public finances. Kenya’s subsidy arrears are estimated at about 17 billion shillings ($131.89 million).

The sharp increase in diesel prices is expected to ripple across the economy because the fuel powers public transport, cargo movement, farming, manufacturing and backup electricity generation.

Analysts warn that businesses are likely to pass the higher costs on to consumers, potentially triggering another round of inflation after Kenya’s inflation rate climbed to 5.7 per cent last month.

Public transport fares are also expected to rise, adding fresh strain on urban commuters already facing higher living expenses.

Ride-hailing operators, including Bolt drivers in Kenya, have in recent weeks complained about rising fuel costs and shrinking earnings.

Kenya already has one of the highest fuel tax burdens in the region. Motorists pay multiple levies and taxes, including VAT, excise duty, road maintenance charges and petroleum development levies.

The latest increase is likely to intensify pressure on the government to provide tax relief or expand subsidies.

Across Africa, governments are increasingly being forced to respond to rising global energy prices. South Africa recently suspended fuel levies for one month, Namibia reduced fuel taxes for three months, while Zambia temporarily suspended excise duty and removed VAT on petrol and diesel.

The fuel shock is renewing concerns about inflation across several African economies that depend heavily on imported petroleum products and are already facing currency weakness and slowing consumer spending.

For Kenya, economists warn that persistently high fuel prices could further squeeze household incomes, raise business operating costs and slow economic activity in the coming months.