More pain at the pump as Epra hikes oil firms' margins by Sh7

 

Epra increased margins for the oil firms by Sh2.16 per litre in the August-September pricing cycle. [Courtesy]

The Energy and Petroleum Regulatory Authority (Epra) has increased the margins for oil marketing companies (OMCs) in the latest pump price review, putting more pressure on consumers, already grappling with the high cost of fuel.

The energy sector regulator increased margins for the oil firms by Sh2.16 per litre in the August-September pricing cycle across the three petroleum products whose prices are regulated.

In the case of super petrol, the margins increased to Sh19.55 per litre over the current pricing cycle from Sh17.39 last month, while margins for diesel went up to Sh19.47 per litre from Sh17.31. The oil firm’s earnings from Kerosene went up to Sh19.40 from Sh17.24.

This is the latest in a series of hikes for OMC margins that started in March 2025 and have since increased by a cumulative Sh7.16 per litre.

This has seen the earnings for the oil firms go up from Sh12.39per litre of super petrol last year to the current levels. Margins for diesel and kerosene have increased from Sh12.36 per litre in March last year.

The increase comes as Kenyans face significantly higher fuel costs following the crisis in the Middle East that resulted in the cost of diesel at some points reaching a historical high of Sh240 per litre.

Over the August-September pricing cycle, the cost of diesel reduced by Sh5 per litre to Sh217.86 while retaining the cost of super petrol at Sh214.03 and kerosene at Sh191.38.

Epra has been implementing a phased increase of the oil marketers’ margins since March last year in line with the recommendations of the Cost of Service Study in the Supply of Petroleum Products (Cossop).

The study recommended increasing margins for oil sector players, noting that the pricing formula at the time failed to capture actual prudently incurred costs and that players were operating on margins stagnant since the last review in 2018 despite high inflation.

It also recommended implementation of the new rates in phases to prevent a sudden price shock for consumers.

In the first phase in March 2025, the margins increased to Sh15.24 per litre of super petrol, Sh15.16 per litre of diesel and Sh15.09 per litre of kerosene.

This was followed up by a second increment in July last year when margins increased to Sh17.39 per litre of super petrol, Sh17.31 per litre of diesel and Sh17.24 per litre of kerosene.

The Institute of Economic Affairs (IEA) Kenya has, in a past report, queried the manner in which Epra raised the margins, including the level of transparency in undertaking the study that led to the Sh7 per litre hike, but also argued that the review has been designed to guarantee profits for the oil sector. This is despite the impact that such a move has on the economy, and called for its abandonment.

“When these margins are adjusted through regulation rather than competition, we need to ask a basic economic question: Are we pricing efficiency, or merely protecting incumbents?” posed IEA economist Fiona Okadia in a July 2025 analysis.

“When a regulator like Epra steps in to guarantee a minimum return, regardless of global price swings, taxes, or exchange rate volatility, it signals a shift: from market-based risk to state-backed profit.

"Such intervention is unjustified, as government policy should be firm-agnostic, focused on ensuring competitive markets and consumer welfare, rather than guaranteeing the survival of any single enterprise even though the government claims that they do so in order to prevent oil marketers from exiting the market and causing a supply crisis.”

Other than the higher margins for the OMCs, the government made incremental increases in taxes and levies on petroleum products.

In 2024, it increased taxes and levies by nearly Sh8 per litre of fuel. This was through the hiking of the Road Maintenance Levy by Sh7 to Sh25 per litre of super petrol and diesel, as well as the 200 per cent increase of the Epra levy to 75 cents from Sh25 cents.

There was also an increase in the Railway Development Levy through the Tax Laws (Amendment) Act of 2024 to two per cent from 1.5 per cent.

It also increased the Import Declaration Fee to 3.5 per cent from 2.5 per cent. The two taxes had been reduced in the Finance Act 2023 to 1.5 per cent (RDL) and 2.5 per cent (IDF).

Epra has also recently increased the cost of using the pipeline to transport fuel from the Kenyan coast to the rest of the country, which is also passed on to consumers.

The National Treasury in April this year reduced the Value Added Tax to eight per cent, initially for a three-month period to July, which was then extended to October this year.

It sought to cushion Kenyans from the high cost of petroleum prices following the escalation in prices after the crisis in the Middle East and the blockade of the Strait of Hormuz.