Rising pressure from fuel costs is now being felt across key parts of the economy, with a business lobby warning that continued global oil instability and local tax burdens are driving up prices, slowing trade and threatening jobs if no action is taken soon.
The Kenya National Chamber of Commerce and Industry says the current fuel situation is being shaped by a combination of international supply disruptions and domestic cost structures, with global tensions, especially around Iran, pushing crude oil prices higher and affecting import-dependent economies like Kenya.
In a statement issued by its Chief Executive Officer KK Mutai, the chamber noted that international developments are playing a central role in the upward pressure on fuel prices.
“KNCCI acknowledges that the current fuel pressure are occurring within a broader global context, particularly the escalating tensions involving Iran, which have disrupted global oil supply chains and contributed to rising international crude oil prices,” the statement read.
Kenya’s dependence on imported petroleum products continues to expose the economy to external shocks, with the chamber noting that the impact is already visible in transport costs, production expenses and general business operations.
The chamber welcomed the government’s decision to remove an extra 8% VAT on fuel, saying it has helped reduce immediate pressure on consumers and businesses.
“KNCCI welcomes this intervention as a timely and necessary step towards cushioning households and businesses from the sharp increases previously experienced,” the statement said.
Even with the tax relief, the chamber warned that fuel prices are still high compared to earlier levels and continue to affect the cost of living and doing business.
“However, while the reduction provides short-term relief, fuel prices remain elevated relative to pre-adjustment levels, and broader cost pressures across the economy persist,” KNCCI noted.
The chamber linked the recent increase in fuel costs to global conflicts, including unrest in the Middle East, which has disrupted supply routes and pushed up the cost of oil shipments.
“The surge has been driven by global factors, including the Middle East conflict, which has caused a 41.5% increase in petrol landed costs, a 68.7% increase in diesel landed costs,” the statement said.
It further stated that international oil prices have risen by between 25% and 40% during the conflict period, adding pressure on economies that rely heavily on imports.
With Kenya importing nearly all its fuel needs, the chamber warned that even small changes in global prices quickly translate into higher local costs, affecting inflation and business operations.
“Kenyan businesses cannot absorb another fuel shock of this magnitude without serious consequences for jobs, prices, and economic stability,” the chamber said.
Transport operators have already raised fares by as much as 25%, while logistics firms continue to struggle with rising freight costs, especially where fuel forms a large part of operating expenses.
Manufacturing and agriculture sectors have also reported increased production costs, estimated between 15% and 30%, raising concerns over competitiveness and sustainability.
The chamber further pointed to global shipping disruptions along key routes such as the Red Sea and Suez Canal, saying delays and higher freight charges are worsening supply chain challenges.
It warned that Kenya’s trade exposure to the Middle East, worth more than Sh700 billion annually, puts the country at risk of continued shocks, particularly in exports such as tea, coffee, horticulture and meat.
“Without urgent intervention, this crisis will translate into higher food prices, reduced export competitiveness, and slower economic growth,” the statement said.
The chamber also raised concern over the domestic fuel pricing system, noting that taxes and levies account for nearly 45% of pump prices, increasing the burden on consumers and businesses.
“This situation is further compounded by the domestic fuel pricing structure, where taxes and levies account for nearly 45% of the pump price,” it said.
It is now calling for a full review of fuel taxes and levies, saying reforms are needed to ease pressure and improve transparency in how prices are set. The chamber also wants stronger engagement between government and private sector before major pricing decisions are made.
Targeted support, it added, should be directed to transport operators, small businesses and export-driven sectors that are most exposed to fuel and logistics costs.
“Kenya cannot continue to manage fuel shocks through short-term measures. Structural reforms are now unavoidable,” KNCCI said.
The chamber added that it is ready to work with government to stabilize prices, protect jobs and support economic stability across all sectors.
“The private sector stands ready to partner with Government to stabilize prices, protect jobs, and safeguard Kenya’s economic competitiveness,” the statement added.
As fuel prices remain under pressure, the chamber warned that failure to act quickly could deepen economic strain and weaken growth prospects.