Kenya fuel prices jump sharply as Middle East crisis reaches the pump

Kenyans filling up from today will pay significantly more for petrol and diesel, after the Energy and Petroleum Regulatory Authority (EPRA) announced its largest single-month diesel price increase on record and the government executed a last-minute policy reversal on how to cushion the blow. The timing could hardly be worse.

The fuel shock lands on an economy already dealing with severe flooding, underperforming tax revenues, and a fiscal deficit that leaves the government with limited room to absorb the pain.

For the period running from 15 April to 14 May 2026, EPRA has set the maximum retail price of super petrol in Nairobi at KSh 206.97 per litre, up KSh 28.69 from KSh 178.28. Diesel climbs KSh 40.30 to KSh 206.84 per litre, an all-time high in Kenya’s pricing history, surpassing the previous record single-month increase of KSh 25.00 set in September 2022 by 61%. Kerosene stays unchanged at KSh 152.78 per litre.

What triggered the increases

The prices reflect fuel cargoes discharged between 9 March and 10 April 2026 — the first pricing window to fully absorb the consequences of US-Israel strikes on Iran on 28 February. Those strikes disrupted shipping through the Strait of Hormuz, the narrow passage through which roughly one-fifth of the world’s oil supply moves.

The impact on landed costs was severe. Diesel’s average import cost rose 68.72% in a single month, from US$636.45 per cubic metre in February to US$1,073.82 in March. Kerosene more than doubled, jumping 105.15% from US$639.48 to US$1,311.93 over the same period. Super petrol increased by a comparatively modest 41.53%, from US$582.11 to US$823.87. The exchange rate used in the computation stood at KSh 130.08 per dollar, a slightly weaker shilling that amplified the damage at the local level.

Kenya’s fuel reserves compound the concern. As of late March, the country held only 16 days of petrol and 19 days of diesel both below the regulatory minimum of 21 days. With Strait of Hormuz disruptions continuing and global prices elevated, there is little reason to expect relief in the May pricing cycle.

The VAT reversal nobody saw coming

The government did not just reach for the PDL Fund to cushion consumers. It also cut the VAT rate on petroleum products from 16% to 13% via Legal Notice No. 69, dated 14 April 2026. That decision looks straightforward on paper. Behind the scenes, it represents a significant policy U-turn.

Just a fortnight ago, the National Treasury was pursuing a different approach entirely. The plan under consideration was to switch VAT on petroleum products from ad valorem — meaning a percentage of the product’s value — to a specific levy pegged to the quantity of fuel purchased, not its price. The logic was clean: decouple the tax from rising import costs so that when global prices spike, the tax burden does not automatically spike with them. Cabinet Secretary John Mbadi had presented that thinking before the National Assembly.

That plan is now shelved. Instead, Treasury kept the ad valorem structure and trimmed the rate by three percentage points. The rate reduction is meaningful, but it leaves a question unanswered. Section 6(1) of the VAT Act empowers the CS to reduce the standard rate by up to 25%, which would allow a floor of 12% — the same level applied during COVID-19 relief measures. The government stopped at 13%. That additional 100 basis points of relief remains on the table, unclaimed.

What drove the reversal? The likely answer sits in Nairobi and Washington simultaneously. Kenya’s Supplementary Appropriations I for 2025/26 carries a KSh 1.3 trillion deficit equivalent to 6.8% of GDP, and the entire senior leadership of the National Treasury was in Washington DC for IMF talks at the time this decision landed.

Tax collections in the current fiscal year have reached KSh 1,156 billion, representing a nominal growth of just 8% year-on-year, a pace that falls short of the revenue targets underpinning the budget. Expanding the tax base remains a government priority, but analysts at NCBA expect it to yield only limited extra revenue in the near term. The pressure to hold the fiscal line while still easing consumer pain appears to have produced a compromise that satisfied neither objective fully.

Chaos at the till: what the VAT change means for oil companies

The operational consequences of changing a VAT rate mid-month are real and immediate. April 2026 VAT returns will be complicated for oil marketing companies (OMCs), who must now account for two different effective rates within the same monthly filing period.

Every OMC operating an ERP system had until midnight on 14 April to update their pricing configurations to reflect the new 13% rate. For companies that sell both fuel and lubricants, which describes most major players, the complexity doubles. Lubricants remain subject to the standard 16% VAT rate. That means a single ERP system now needs to apply two different VAT rates across product lines simultaneously, with the split effective from the same date. Getting that wrong on a return filed with the Kenya Revenue Authority creates exposure.

How the government cushioned the blow

Without intervention, the increases would have been far steeper. Oil marketers had projected petrol could rise by up to KSh 37 per litre and diesel by as much as KSh 70. Beyond the VAT cut, the government drew approximately KSh 6.2 billion from the Petroleum Development Levy (PDL) Fund to stabilise prices. The stabilisation deficit absorbed per litre stands at KSh 4.68 for petrol and KSh 23.92 for diesel.

The kerosene figure tells the most striking story. The PDL subsidy on kerosene amounts to KSh 108.10 per litre, meaning the product would otherwise cost roughly KSh 260 per litre at the pump — nearly double its current price. That gap protects low-income households who rely on kerosene for cooking and lighting.

NCBA’s market analysts flag that further government intervention remains probable as the crisis deepens, particularly through reinstatement or expansion of the fuel subsidy mechanism. But that intervention operates in a constrained fiscal environment. Emergency spending on the severe flooding that struck the country in March has already strained the budget, and with tax revenues growing below target, the space to absorb additional subsidy costs is narrow. Relief, where it comes, is likely to be short-term and carefully rationed.

Transport costs rise 13% overnight

The price shock does not stop at the fuel station. The Kenya Transporters Association (KTA) issued an advisory to members on 14 April warning that overall transport operating costs would rise by an estimated 13 to 14% as a direct result of the diesel increase.

The calculation is straightforward. Fuel accounts for approximately 55% of total road freight operating costs. A 24.5% rise in diesel prices — from KSh 163 to KSh 203 per litre in KTA’s computation, which references Mombasa-area prices, multiplied by that 55% cost share produces a 13.5% increase in operating costs. KTA Chairman Newton Wang’oo advised members that such a rise cannot be absorbed sustainably, and called on all transporters to review their rate structures and communicate the adjustments clearly to customers and contractual partners.

That message carries consequences for every Kenyan consumer. Road freight moves food, manufactured goods, construction materials, and agricultural inputs across the country. A 13% transport cost increase feeds directly into the retail prices of goods on shop shelves — and it arrives alongside a fuel price shock that the Central Bank of Kenya had already flagged as a growing inflation risk in its 10 April weekly bulletin.

The broader economic threat

The fuel shock does not arrive in isolation. NCBA’s market desk warns that the domestic economic landscape now faces a meaningful risk of further slowdown, with inflationary pressures building from multiple directions at once.

Higher global oil costs transmitting to local pump prices represent the most immediate pressure. But the flooding emergency in March added unplanned spending demands on a government already running a large deficit. Those two shocks together, the external oil price crisis and the domestic climate event — reduce the government’s ability to respond aggressively to either.

Inflationary pressure will work through the economy in waves. First, transport costs rise, as the KTA advisory makes clear. Then food prices follow, as higher freight rates push up the cost of moving produce from farm to market. Manufacturing input costs rise next, and those eventually reach the consumer. The Central Bank of Kenya will watch this sequence carefully, but the tools available to it — primarily the policy rate — offer limited relief against an inflation shock that originates in a foreign conflict and a domestic flood, not in excess domestic demand.

The One Petroleum controversy

Energy Cabinet Secretary Opiyo Wandayi told a parliamentary committee on 13 April that had the disputed One Petroleum cargo been factored into the computation, petrol prices would have risen by a further KSh 14 per litre. The cargo, delivered by the MT Paloma, was excluded from the price computation under a prior government directive — a decision that kept pump prices lower than they would otherwise have been.

The announcement itself marks a leadership transition at EPRA. It was signed by Dr. Joseph Oketch as Acting Director General, following the arrest of former DG Daniel Kiptoo Bargoria. Bargoria, former Petroleum Principal Secretary Mohamed Liban, and former Kenya Pipeline Company Managing Director Joe Sang face charges including abuse of office and economic crimes, linked to alleged manipulation of fuel stock data and procurement conducted outside the Government-to-Government framework.

What to watch next

The next pricing cycle, covering 15 May to 14 June 2026, depends on three variables: whether Strait of Hormuz shipping normalises, what the IMF talks in Washington produce in terms of fiscal headroom, and how quickly flood-related emergency spending winds down. None of those outcomes is certain. Until at least one of them resolves favourably, both pump prices and the wider cost of living in Kenya face continued upward pressure.

Pump prices by town, 15 April – 14 May 2026

Prices vary by location due to transportation costs. Below are the maximum pump prices for major towns:

Mombasa records the lowest prices nationally, reflecting its position as the primary entry point for imported fuel. Mandera, the most remote supply point on the list, pays KSh 25.46 more per litre of super petrol than Nairobi.