Explainer: Why fuel prices remain high in Kenya despite falling import costs

Kenyan drivers have continued to pay high prices at the pump, even when the cost of importing fuel decreases. Government cross-subsidies and higher oil marketers' margins are the main reasons behind this disparity. After redirecting potential relief from diesel to petrol, the government increased prices to help keep petrol more affordable.

The arrangement, while stabilizing prices, means consumers may not see immediate benefits from falling international fuel costs. In August, diesel's landed cost (import cost plus other charges) fell by more than Ksh17 per liter, yet the government added Ksh19 per liter instead of passing the savings to consumers. The government claims the extra charge helps support petrol users after diesel's landed cost increased.

This approach, while balancing price impacts across different fuel types, lacks legal grounding. The stabilisation fund, financed through a levy on petroleum products, could provide relief during price rises but may not cover substantial fluctuations. Oil marketers' margins also rose by Ksh2 per liter in the latest adjustment in August, reflecting their costs in supplying fuel to consumers.