Energy and Petroleum Cabinet Secretary Opiyo Wandayi has defended the government’s fuel subsidy programme and tax interventions, saying the measures have shielded Kenyans from severe fuel prices shocks and supply disruptions triggered by instability in the Middle East.
Speaking amid concerns over rising fuel costs and the impact of global oil market volatility, Wandayi said Kenya had successfully maintained uninterrupted fuel supplies despite disruptions caused by the conflict involving Iran and the temporary closure of the Strait of Hormuz, a critical global oil shipping route.
According to the CS, Kenya avoided the fuel shortages and long queues witnessed in several African countries because of a government-to-government fuel importation framework introduced in 2023.
Under the arrangement, international oil suppliers including Saudi Aramco, ENOC and ADNOC are allowed to source petroleum products from any market globally, ensuring flexibility during periods of supply disruption.
“Despite the conflict involving Iran and the resulting disruptions in global energy markets, Kenya has avoided fuel shortages and maintained a steady supply of petroleum products across the country,” Wandayi said.
The CS said government interventions had prevented diesel prices from rising to as high as KSh260–270 per litre, levels that would have significantly increased the cost of transport, manufacturing and agricultural production.
He revealed that before the recent transport sector strike, the government had already reduced Value Added Tax on petroleum products from 16 per cent to 8 per cent and provided a KSh5 billion fuel subsidy during the April-May pricing cycle.
Following discussions with public transport operators, the government introduced an additional subsidy that lowered diesel prices by approximately KSh10 per litre in the current pricing cycle.
“The fuel subsidy announced by the government was a fulfillment of the commitment that His Excellency the President made to public transport sector players in Mombasa and a demonstration that the government remains extremely sensitive to the plight of its citizens,” Wandayi said.
The government has steadily increased spending on fuel stabilization, with subsidies rising from about KSh6.2 billion during the April-May cycle to KSh7.7 billion in the May-June cycle. Approximately KSh9 billion has been allocated for the current pricing period.
Wandayi acknowledged that the interventions had come at a significant fiscal cost, noting that reducing VAT on fuel from 16 per cent to 8 per cent resulted in foregone revenue of roughly KSh12 billion.
He argued, however, that the sacrifice was necessary to protect consumers and businesses from extraordinary global circumstances.
“Government must remain extremely flexible and sensitive to happenings in a dynamic society because extraordinary times call for extraordinary measures,” he said.
The CS explained that fuel subsidies are financed through the Petroleum Development Levy, which currently generates between KSh2.2 billion and KSh2.4 billion monthly. The fund collects KSh5.40 per litre on petroleum products and KSh0.40 per litre on kerosene.
He said the long-term objective remains reducing reliance on subsidies once global market conditions stabilize.
“The government’s objective is to progressively reduce reliance on fuel subsidies because the current welfare support system is funded through fixed levies and is therefore limited in scale,” he said.
Kenya imports approximately 600 million litres of petroleum products every month, including about 300 million litres of diesel, 220 million litres of petrol and nearly 100 million litres of jet fuel and kerosene.
Because imports closely match monthly consumption, Wandayi said local fuel prices respond relatively quickly to international market movements, typically within one pricing cycle of about a month.
The CS noted that international oil prices began rising between February and April as geopolitical tensions escalated but have shown signs of stabilizing since May following recent diplomatic developments involving Iran and the United States.
However, he cautioned that uncertainty remains.
“No one can say with certainty how long the situation in the Middle East will last,” he said. “While a truce has been announced, similar agreements have been made before, and it remains to be seen whether the latest understanding between Iran and the United States will hold.”
Wandayi said the government’s immediate priority is to prevent further increases in fuel prices while seeking opportunities to lower pump prices should global oil markets continue to improve.
Current benchmark prices stand at approximately KSh214 per litre for petrol, KSh222 per litre for diesel and KSh190 per litre for kerosene.
On calls for tax reductions, the CS maintained that fuel pricing requires balancing consumer relief with revenue collection needed to finance public services and infrastructure development.
“Simply calling for the removal of fuel taxes does not address the full picture,” he said, noting that international crude oil prices remain the largest determinant of pump prices.
Meanwhile, Wandayi disclosed that discussions on establishing a regional oil refinery along the East African coast are at an advanced stage as governments seek to strengthen regional energy security and improve petroleum economics.
Possible locations under consideration include Mombasa, Lamu and Tanzania’s port city of Tanga, with a formal announcement expected in due course.
The CS also reiterated the government’s commitment to maintaining affordable and reliable energy supplies for industries, saying recent consultations with manufacturers had reaffirmed the importance of energy security in supporting economic growth and industrial competitiveness.
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