Explainer: Why Fuel Is So Expensive in Kenya – And Where Your Sh200 Per Litre Actually Goes
Nairobi, Kenya – Every time a Kenyan motorist pulls up to a petrol station, the pump price now reads well over Sh200 per litre for both petrol and diesel – a record high that has pushed up transport fares, food prices, and the cost of living across the board. But while consumers feel the pain at the pump, few understand exactly where that money disappears to.
The short answer is that nearly half of what you pay goes to taxes and levies, while the rest covers the landed cost of imported fuel, distribution expenses, and margins for oil marketers. Behind every litre is a complex pricing formula set by the Energy and Petroleum Regulatory Authority (EPRA), and right now, global turmoil combined with local taxation has created the perfect storm for Kenyan wallets.
The single largest component of Kenya’s fuel prices is government-imposed taxes. Kenyan consumers pay a total of nine different taxes and levies on every litre of petrol and diesel, which together account for up to roughly 40 to 46 per cent of the final pump price. For super petrol, taxes and levies now add approximately Sh82 per litre. For diesel, the tax burden sits at about Sh75 per litre, while kerosene carries roughly Sh68 per litre in taxes. This means that for every Sh200 you spend on fuel, nearly Sh90 goes directly to the government in various charges before any product even reaches your tank.
These taxes include excise duty, which adds nearly Sh22 per litre for petrol and about Sh11 for diesel and kerosene. Value Added Tax, or VAT, is currently reduced to 13 per cent from a previous 16 per cent in a government effort to cushion consumers, though this relief has been largely offset elsewhere. The Road Maintenance Levy now stands at Sh25 per litre for both petrol and diesel, a significant increase from lower rates in previous years.
The Railway Development Levy has also climbed to roughly Sh2 per litre for petrol, Sh2.60 for diesel, and over Sh3 for kerosene. Additional charges include the Import Declaration Fee, the Petroleum Regulatory Levy, the Anti-Adulteration Levy applied to kerosene, and the Merchant Shipping Levy, which adds a fraction of a shilling to every litre of every petroleum product.
Before any of these taxes are applied, EPRA begins its monthly pricing calculation with the landed cost – the total expense of buying refined fuel from international markets and shipping it to the Port of Mombasa. This includes the price of the product itself, insurance, and freight charges. In recent pricing cycles, global disruptions have sent these costs soaring. The landed cost of super petrol rose by over 41 per cent, while diesel recorded an even steeper jump of nearly 70 per cent. Kerosene saw the most dramatic increase, more than doubling.
The primary driver of this surge is geopolitical tension in the Middle East, particularly disruptions along the Strait of Hormuz – a chokepoint through which a large portion of global oil flows. Iran has been targeting oil refining infrastructure in neighbouring states and disrupting shipments, pushing benchmark crude oil prices well past $100 per barrel.
Once fuel finally arrives in Mombasa, additional costs are layered on before it reaches your local station. Storage and distribution costs add roughly Sh4 to Sh5 per litre for transportation through pipelines and from depots to retail outlets. Wholesaler and retailer margins combine to add approximately Sh17 per litre, with retailers applying an average margin above Sh11 per litre and wholesalers charging about Sh6 per litre. These margins account for the operational expenses of the companies that actually get the fuel into your vehicle.
Recognising the severe impact of rising fuel prices on households and businesses, the government has taken two key steps to try to cushion consumers. First, it reduced VAT on petroleum products from 16 per cent to 13 per cent, a cut allowed under tax laws. However, this reduction has been largely offset by increases in other levies such as the Railway Development Levy and Import Declaration Fee.
Second, the government has tapped into the Petroleum Development Levy Fund, injecting billions of shillings into the latest pricing cycles to stabilise prices. This intervention appears as a “price stabilisation adjustment” on pump statements, shaving several shillings off petrol, over Sh20 per litre off diesel, and a substantial amount off kerosene. Without these interventions, analysts estimate that diesel prices would have jumped by much more than the actual increase seen at the pumps.
When compared to neighbouring countries, Kenyan fuel prices generally sit in the middle to upper range. Uganda, Rwanda, and South Sudan, which import all their refined products through Kenya, face even higher prices after adding their own transport and tax layers. In contrast, Tanzania has historically maintained slightly lower taxes on petroleum, giving it a marginal price advantage. However, the gap has narrowed in recent years as all East African nations grapple with the same global pressures on crude oil prices.
For the average Kenyan, the consequences of expensive fuel ripple through every aspect of daily life. Transport fares rise, forcing commuters to spend more of their wages just to get to work. Food prices increase because farmers and distributors pass on higher fuel costs for tractors, trucks, and generators.
Electricity bills remain elevated because a portion of power is still generated using diesel. Even the cost of cooking gas is tied to global petroleum markets, meaning families pay more just to prepare meals. The cycle is relentless, and until either global crude prices fall significantly or the government restructures its tax regime, consumers are likely to continue feeling the pressure at every turn.
