Fuel-price squeeze: Why Kenyans could pay more even when govt caps pump prices

A disagreement over wholesale fuel prices is putting pressure on independent petrol stations, with motorists facing higher costs and businesses grappling with increased transport expenses, according to the latest updates. The disagreement is prompting questions about whether Kenya's current fuel pricing regulations adequately safeguard consumers from the top of the supply chain to the actual pump.

The Petroleum Outlets Association of Kenya (POAK) and the Kenya Independent Petroleum Dealers Association (KIPEDA) have called upon independent dealers to cease purchasing fuel from oil marketing companies (OMCs) that allegedly exceed the maximum wholesale prices set by the Energy and Petroleum Regulatory Authority (EPRA). In a joint statement released on October 28, 2026, the agencies highlighted these margin pressures, which endanger the financial viability of some stations and potentially jeopardize fuel supply availability.

While the claims of price discrepancies have not been substantiated by publicly available invoices or a full EPRA investigation, the dispute has shed light on the broader issue of whether the regulated retail price can be met if businesses struggle to procure the fuel they are obligated to sell. EPRA raised the maximum pump prices for petrol, diesel, and kerosene between October 15 and November 14, resulting in a Ksh12.93 increase for petrol, Ksh9.90 for diesel, and Ksh28.49 for kerosene.

These changes translate to Ksh646.50 more per 50 litres of petrol, and Ksh4,950 more for 500 litres of diesel.

The added expenses can lead to transport operators, delivery businesses, and companies reliant on road freight either absorbing the costs, passing them onto customers, or cutting expenses elsewhere. Ultimately, the impact on consumers will hinge on how companies respond to the rising expenses.

The International Energy Agency (IEA) has cautioned that higher fuel prices can adversely affect households, businesses, and the wider economy, based on a March 2026 report. However, the report does not directly address the implications of Kenya's wholesale fuel price dispute.

EPRA's published wholesale price ceilings for the current period stand at Ksh211.80 per litre for petrol, Ksh212.60 for diesel, and Ksh204.79 for kerosene. The difference between these wholesale ceilings and the regulated retail ceilings is not a retailer's guaranteed profit; it must cover recognized distribution and operating costs. If a dealer pays more for fuel but cannot raise the pump price beyond the regulated maximum, its margin could be squeezed.

EPRA Director-General Edward Kinyua explained that international oil prices drive monthly adjustments in Kenya's wholesale prices, but the current dispute pertains specifically to the rates charged to independent retailers, rather than just the cost of imported fuel. Establishing whether the wholesale ceilings have been breached requires a closer examination of invoices, transaction terms, and the applicable price schedule. EPRA's published ceilings alone do not provide definitive evidence of a violation.

The dealers' warning raises concerns about potential local shortages, although it does not establish a nationwide fuel scarcity. The availability of fuel hinges on various factors, including imports, storage, distribution, wholesale transactions, and retail operations. A disruption at any point in this chain can affect local supplies even if fuel remains accessible elsewhere.

The Ministry of Energy and Petroleum, along with EPRA, should clarify whether these complaints have been investigated and if any stock-outs have occurred. The oil marketing companies involved should also address the dealers' claims. While the government has extended the reduced 8% VAT rate on petroleum products through the Tax Laws (Amendment) Act, 2026, this measure targets the tax component in the pricing formula and cannot resolve the dispute over dealers' wholesale costs.

The Senate Energy Committee has proposed applying VAT to landed fuel costs instead, potentially lowering pump prices while preserving revenue for infrastructure funds. However, this proposal has not been enacted into law. The Treasury's estimate of Ksh94 billion in fuel VAT revenue for the financial year ending June 2027 should not be mistaken for an assessment of potential revenue loss under the Senate proposal. A thorough investigation into the allegations is crucial before making conclusions.