Fuel dealers who have been taking advantage of cheap kerosene to adulterate diesel face shrinking profit margins after the government scrapped the subsidy, bringing the price difference between the two products down to just Sh7.89 per litre from a record Sh90.14.
The narrowing gap is expected to discourage the illegal mixing of kerosene and diesel, a practice that can cause serious damage to vehicle engines, agricultural machinery and industrial equipment. Motorists, farmers and manufacturers are among those exposed to heavy repair costs and business losses when contaminated fuel is used.
The change follows the government's decision to withdraw the kerosene subsidy for the first time since August 2025, resulting in a Sh28.49 per litre increase in kerosene prices during the pricing period ending November 14. Diesel prices rose by Sh9.90 per litre, while petrol went up by Sh12.33 over the same period.
The Energy and Petroleum Regulatory Authority (Epra) Director-General Edward Kinyua said retaining the subsidy would have left kerosene at least Sh30 cheaper per litre than diesel, creating room for illegal dealers to profit from the price difference.
In Nairobi, kerosene is retailing at Sh219.87 per litre, against Sh227.76 for diesel. The difference has fallen sharply from the levels recorded earlier in the year, reducing the financial reward for dealers who mix kerosene into diesel before selling it.
"What we have done today is to reflect the actual price for the three products. If we had subsidised kerosene and kept it at Sh190 per litre, the price differential would have been Sh30 and that is a huge incentive for anyone to adulterate fuel, Mr Kinyua said on Wednesday.
"We are alive to this problem, we are aware that crooks keep evolving, and we do not want to give them reasons to try and beat our system."
The price difference between kerosene and diesel reached an all-time high of Sh90.14 in the month to June 14 this year, when the government provided a subsidy of Sh91.29 per litre, its highest level. The support kept kerosene considerably cheaper than diesel, making it attractive to dishonest traders seeking to increase their earnings through fuel adulteration.
The subsidy has fluctuated between Sh0.89 and Sh91.29 per litre since last year as the government tried to protect low-income households from rising fuel costs. The intervention came amid the Middle East conflict, which pushed international prices of refined petroleum products to their highest levels in more than a decade.
However, oil marketers warned that the large subsidy was widening the price difference between kerosene and diesel, giving unscrupulous dealers a stronger reason to mix the products. They raised concerns that the practice could spread as traders sought to benefit from the lower cost of kerosene.
Fuel adulteration involves blending kerosene with other petroleum products, particularly diesel, to increase the volume of fuel available for sale and boost profits. The practice is mainly associated with these two products because they share similar characteristics, including density, making them easier to mix.
The illegal trade was widespread before 2018, when dealers exploited the price difference between kerosene and diesel to make extra money. The government responded by introducing an anti-adulteration levy of Sh18 per litre of kerosene in an effort to discourage the practice.
According to oil marketers, the levy pushed kerosene prices higher and reduced demand because mixing the product with diesel became less financially rewarding. The latest reduction in the price gap is expected to place further pressure on the business model used by dealers involved in the practice.
Kerosene consumption remains far below demand for diesel and petrol, making it the least costly of the three products for the government to subsidise. Monthly consumption averages 4.87 million litres of kerosene, compared with 252.9 million litres of diesel and 200.6 million litres of petrol over the same period.
The difference in consumption reflects the much wider use of diesel and petrol across transport, agriculture and industry, while kerosene demand remains comparatively low. The government's pricing decision therefore comes amid the competing need to cushion households against high energy costs and prevent price differences from encouraging illegal fuel trading.