Kenya’s petroleum sector is facing renewed strain as rising global oil prices, a weakening shilling, and a heavy tax burden continue to push pump prices higher, with industry players warning that levies now make up nearly half of what consumers pay for fuel. Concerns are growing that the current pricing structure is squeezing businesses and households, even as the government relies heavily on petroleum taxes to fund key public services.
Petroleum Outlets Association of Kenya chair Martin Chomba says the structure of fuel taxation has left little room for policy flexibility, arguing that the system is already tied to pre-set government spending obligations and economic commitments.
Speaking on Radio Generation on Tuesday, Chomba said the design of petroleum taxation means most of the money collected is already allocated to specific uses such as development projects and infrastructure financing, limiting any quick adjustments to ease consumer prices.
He added that several levies embedded in fuel pricing continue to raise the final cost paid at the pump, making fuel more expensive than the base import and distribution costs.
His remarks come at a time when Kenya’s fuel market is under pressure from successive price increases driven by global crude oil disruptions linked to geopolitical tensions and a weaker local currency.
The Energy and Petroleum Regulatory Authority (EPRA) recently increased retail fuel prices, pushing Super Petrol to about Sh214.25 per litre and Diesel to Sh242.92 per litre in Nairobi, both crossing the Sh200 mark as landed costs and taxes rose.
Earlier monthly reviews have also reflected a steady climb in fuel costs, with international oil prices remaining volatile and supply chains tightening in major producing regions.
Kenya, which depends fully on imported petroleum products, continues to face added pressure from exchange rate fluctuations and rising import costs, factors that are reflected directly at the pump.
Petroleum officials maintain that the pricing formula accounts for global market trends, taxes, and distribution costs, while targeted subsidies have at times been used to soften the impact on selected products.
However, the latest increases have sparked public concern, transport disruptions, and renewed debate over the affordability of fuel and its impact on the wider economy.
Chomba said levies alone account for between 40 and 50 percent of the final retail price of fuel, pointing to multiple charges embedded within the pricing system.
He cited the Petroleum Development Levy, which he estimated at about Sh5.40 per litre, alongside other charges such as the road maintenance levy and anti-adulteration levy.
According to him, these charges are tied to specific policy goals, including road construction, infrastructure upkeep, and safeguarding fuel quality within the supply chain.
He explained that the anti-adulteration levy was introduced to curb practices such as fuel mixing, which can damage engines and distort market pricing, especially in kerosene and diesel segments.
Even so, he questioned whether the current structure still serves consumers efficiently, arguing that the layering of several small charges makes the system less transparent.
Chomba said consumers often pay without a clear breakdown of the total cost, noting that multiple levies gradually add up to a heavy burden at the pump.
He also raised concerns about the application of Value Added Tax on petroleum products, questioning the rationale of taxing fuel in a sector where there is limited value addition before consumption.
He argued that a large share of the price increase is driven more by administrative and fiscal requirements than by production-related costs.
Despite his criticism of the system, Chomba defended the government’s position, saying Kenya depends heavily on taxation to run public services and has limited alternative sources of revenue.
He noted that unlike oil-producing countries, Kenya is fully import-dependent, leaving the economy exposed to global price shocks and currency fluctuations.
This dependence, he said, puts the government in a difficult position as it tries to balance revenue collection with economic stability.
“The government is caught in between a rock and a hard place,” he expressd, adding that reducing taxes would have immediate implications for public spending and debt servicing.
Chomba further said that high fuel prices in Kenya have a deeper impact compared to other economies due to differences in income levels and production capacity.
He warned that if prices remain high for an extended period, the country could see business closures, reduced productivity, and rising inflation across different sectors.
He suggested that any adjustments to the tax regime should be temporary and carefully targeted to allow the economy time to stabilise before returning to normal levels.
The Petroleum Outlets Association of Kenya chair also argued that policy decisions should take into account the survival of businesses, noting that restarting closed enterprises is often more costly than short-term relief measures.
He concluded that while taxation remains essential for government operations, Kenya may need to review and reorganise fuel-related levies to strike a balance between revenue needs and economic stability.