Expert: Why fuel prices have shot up

Martin Chomba, Chairman of the Petroleum Outlets Association of Kenya during an interview on spice. [Screen Grab] Monday's hike in fuel prices in the country is directly linked to the ongoing conflict between Iran and Israel, an energy expert now says. Martin Chomba, Chairman of the Petroleum Outlets Association of Kenya, explained that Kenya's fuel is purchased using a weighted average system, meaning we are now paying for last month's price surge. "When there is geopolitical tension, especially in the Middle East, it strains the global supply and that spikes the prices...The way we buy fuel in Kenya, we use the weighted average. In most cases, you will see that the fuel we will consume this month is the weighted average of last month. We are paying for the spike that happened in June when the conflict happened," said Chomba, while on Spice FM on Wednesday, July 16. The tension he refers to is the conflict that erupted last month, when Israel launched surprise attacks on Iran's military and nuclear facilities amid the wider Gaza war. Iran retaliated with missile strikes, further escalating instability in the Middle East, a key region for global oil supply. According to Chomba, such geopolitical unrest typically forces oil tankers to avoid the Middle East route, opting for longer, more expensive paths that drive up distribution costs globally. While the spike is global, Chomba noted that Kenyans often feel a heavier burden at the pump due to fixed premiums built into local pricing. "Even if the prices are low globally, Kenya's will still be high. And if they are high globally, Kenya's might be slightly higher due to the premiums," he said. These premiums include costs associated with refining, distribution, marketing, and taxes, in addition to the base price of crude oil. These factors contribute to the final price consumers pay at the pump. In 2024, for instance, Parliament approved a hike in the Road Maintenance Levy, raising it from Sh18 to Sh25 per litre. Without that increase, Kenyans would currently be paying Sh179 for petrol and Sh164 for diesel, as opposed to the current Sh186 and Sh171, respectively. Chomba also took issue with the 16 per cent VAT imposed on imported fuel, calling it unjustified. "There is no value added to the fuel we import. We do not have a petroleum industry in Kenya; we have a petroleum logistics industry. We trade petroleum the way we import it. Therefore, adding VAT to it doesn't make sense. The amount being held is big, 16 per cent." This translates to Sh29.76 from every litre of petrol sold at Sh186 going to the government, meaning if the taxes had been lower, the prices would have also been lower despite the war. He added, "The number of levies that we put on petroleum has a huge impact on the prices," he said. "We rely on petroleum as the low-lying fruit. People go to the petroleum industry to add levies every time they realise they need money. For example, just before the Cabinet was dismantled, the then Transport CS sneaked in a levy on petroleum that was Sh7. Meaning, if that levy was not there, we would be buying fuel at Sh179 and not Sh187." His remarks come as Kenyans brace for a sharp increase in pump prices following months of relative stability. According to EPRA's latest review, Super Petrol will now retail at Sh186.31 per litre, up by Sh8.99. Diesel and Kerosene prices have also risen by Sh8.67 and Sh9.65, respectively. "The Energy and Petroleum Regulatory Authority (EPRA) has calculated the maximum wholesale and retail prices of petroleum products which will be in force from July 15, 2025 to August 14, 2025," EPRA said in a statement.

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