A Balancing Act: Cheaper Petrol Imports Fail to Lower Kenyan Pump Prices

Landing costs for landed super petrol dropped sharply in Kenya's latest monthly fuel pricing review, but pump prices remained frozen across the country.

Motorists and businesses expecting relief at the pump will continue paying the same rates for super petrol despite a significant drop in its international landed cost.

In Nairobi, super petrol continues to trade at KSh 214.03 per litre ($1.65), while Mombasa consumers are paying KSh 210.87 per litre ($1.63). The decision to hold petrol prices steady comes even as the landed cost of diesel moved in the opposite direction, jumping by 11.86 per cent over the same period. According to Kenyans.co.ke.

For ordinary households and commercial operators, fuel pricing directly dictates the cost of daily life, driving everything from matatu fares and electricity bills to the price of food transported to urban markets. When international import prices fall, consumers expect an immediate drop in retail costs.

The current freeze illustrates how Kenya's fuel pricing formula balances cross-subsidies, tax structures, and currency fluctuations before landing on the final figure displayed at gas stations.

Divergent import trends

The latest price review highlights a stark divergence in the landed costs of refined petroleum products entering through the port of Mombasa. Landed cost represents the total landed price of fuel at the port, including foreign purchase costs and ocean freight, before local taxes, pipeline transport fees, and retail margins are added.

While super petrol import costs dropped by nearly 8 per cent, diesel landed costs surged by 11.86 per cent. Despite this steep increase in international diesel costs, retail diesel prices in Kenya actually experienced a slight decrease. In Nairobi, diesel prices fell by 2.24 per cent to KSh 217.86 per litre ($1.68), down from previous levels. In Mombasa, retail diesel dropped by 2.28 per cent to KSh 214.58 per litre ($1.66).

Kerosene prices, which heavily impact low-income households using the fuel for cooking and lighting, remained completely unchanged across all major urban centres. Nairobi kerosene sits at KSh 191.38 per litre ($1.48), while Mombasa consumers pay KSh 188.09 per litre ($1.45).

How price stabilisation works

The workings behind why cheaper petrol import costs did not result in a lower pump price lie within the government's price stabilisation mechanism managed by EPRA. Under the current regulatory structure, the pricing formula absorbs sharp movements in international prices to prevent extreme volatility at the pump.

When the landed cost of one product rises significantly, such as the 11.86 per cent jump in diesel, regulatory mechanisms can use cushions or offset gains from cheaper products to keep retail diesel prices manageable. Diesel is the primary economic engine for Kenya's transport, agriculture, and manufacturing sectors. Allowing diesel to spike in line with its landed cost would have triggered an immediate wave of inflationary pressure across the broader economy.

Consequently, the cost savings achieved on super petrol imports were effectively utilized to absorb the higher international costs of diesel, holding petrol flat while enabling a minor retail cut on diesel.

Regional price spreads

Retail fuel prices vary across Kenya based on distance from the port of Mombasa, reflecting pipeline and road transport tariffs required to move fuel inland.

Western regional hubs such as Kisumu and Eldoret carry higher retail rates due to the additional logistical distance from coastal discharge terminals.

Impact on consumers and transport

The decision to hold petrol constant while offering a minor reduction on diesel provides mixed outcomes for the economy. Private vehicle owners using super petrol will see no reduction in their monthly transport budgets. However, commercial transport operators relying on diesel benefit from a slight cost reduction, which may help keep long-distance freight rates and public transport fares stable.

Agriculture and heavy manufacturing, both heavily reliant on diesel power, avoid what would have otherwise been a sharp cost increase driven by the 11.86 per cent jump in international diesel landed prices.

Looking ahead to the next monthly review, market watchers and motorists will be tracking whether international crude prices remain stable and how global market shifts flow through EPRA's formula in the coming cycle.