Treasury Cabinet Secretary John Mbadi has warned that fuel prices in Kenya could have surged beyond KSh300 per litre were it not for aggressive government intervention to cushion consumers from a deepening global fuel crisis triggered by geopolitical tensions in the Middle East.
Speaking as the country grapples with rising transport costs and a looming paralysis in the public transport sector following an ongoing matatu strike, Mbadi said the escalating conflict involving the United States and Iran, particularly the closure of the Strait of Hormuz, had severely disrupted global oil supply chains.
According to Mbadi, the closure of the strategic shipping route has affected nearly 20 per cent of the world’s oil supply, sending petroleum prices soaring internationally and forcing African countries to source fuel from alternative, more expensive markets.
“A major fuel crisis is unfolding, causing serious concern as the transport sector faces paralysis due to the ongoing strike, but it is important to understand that this is part of a wider global challenge,” said Mbadi.
“The closure of the Strait of Hormuz amid the escalating conflict involving the USA and Iran has disrupted nearly 20% of the world’s oil supply.”
He revealed that diesel prices on the global market had jumped dramatically from $642 per metric ton in February to $1,120 per metric ton currently, significantly raising Kenya’s import bill.
Despite the sharp increase in landed fuel costs, Mbadi said the government had used the Fuel Stabilisation Fund to prevent an even steeper rise in pump prices.
“Government intervention continues to shield Kenyans from the full impact of the global fuel crisis, with diesel now retailing at KSh242 per litre instead of an estimated KSh273, while petrol would have reached KSh311 per litre without the cushioning measures introduced since February,” he said.
The CS disclosed that the stabilisation fund initially held about KSh17 billion, with KSh6.2 billion already spent in April to cushion consumers.
Another KSh5 billion is currently being deployed this month to maintain stable prices, leaving the fund with roughly KSh5 billion to sustain interventions through the end of June.
Mbadi warned that prematurely exhausting the remaining balance could trigger a far more severe fuel crisis.
“The government is preserving about KSh5 billion in the fuel stabilisation fund to sustain interventions through the end of the financial year, warning that exhausting the fund now could push fuel prices beyond KSh300 per litre and trigger a deeper crisis,” he said.
The Treasury CS insisted Kenya is not facing a fuel shortage despite mounting public anxiety and transport disruptions.
“Kenya is not facing a fuel shortage, as the government has guaranteed continuous supply with petroleum products still being shipped and delivered into the country despite the global crisis,” he said.
He noted, however, that the key challenge remains the rising landed cost of petroleum products as oil marketers increasingly seek alternative suppliers outside the Gulf region.
Mbadi said even alternative sourcing markets such as Nigeria present logistical complications and could end up costing Kenya more than the current government-to-government import arrangement involving Gulf suppliers and Indian refiners.
He defended the government’s fuel tax regime amid growing criticism from consumers and transport operators over the high cost of fuel.
While acknowledging that taxes and levies contribute significantly to pump prices, Mbadi argued that the revenues remain critical for sustaining public services and infrastructure development.
“While taxes and levies may attract criticism, they continue to support essential public services including road maintenance, with Kenya maintaining over 20,000 kilometres of paved roads, the longest network in the region,” he said.
He further warned that reducing VAT and fuel taxes could destabilise public finances and undermine economic recovery efforts.
“Reducing VAT and other fuel taxes may offer short-term relief, such decisions carry serious consequences for revenue collection, budget implementation, and long-term economic stability,” Mbadi said.
“Populist choices in 2024 nearly pushed the country into debt default.”
The CS also criticised destructive protests and road blockades linked to the rising cost of living debate, saying they worsen economic hardship instead of resolving the crisis.
“The hardship caused by rising fuel prices and the stalled economy. Destructive protests and road blockades only worsen the crisis and I urge Kenyans to reject attempts to politicise a global challenge that requires calm and balanced solutions,” he said.
Mbadi maintained that Kenya remains relatively better cushioned compared to several regional economies, pointing to ongoing fuel shortages in some neighbouring countries.
He cited Burundi, which has reportedly imposed strict rationing measures limiting consumers to 30 litres of fuel per week.
The Treasury CS also argued that Kenya’s fuel prices compare favourably against regional and global markets despite the recent increases.
He claimed previous regional comparisons showed diesel retailing at KSh196.6 per litre in Kenya compared to KSh217 in Tanzania and KSh200 in Uganda.
Mbadi added that even major oil-producing economies such as the United States had recorded sharp increases in fuel prices, with diesel prices rising from $3.8 to $5.62 per gallon.
“Rising fuel prices are being driven by global supply disruptions caused by war, with reduced supply and high demand pushing up costs worldwide,” he said.
The remarks come at a time when Kenya’s transport and logistics sectors are under growing pressure from rising operational costs, with matatu operators demanding additional government relief measures amid fears that sustained fuel price increases could trigger broader inflation across the economy.
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