Epra under fire over sharp rise in fuel prices

The Energy and Petroleum Regulatory Authority (Epra) on Monday increased fuel prices by steep margins, resulting in pump prices reaching the highest point since September last year. 

The regulator hiked the cost of super petrol by Sh8.99 a litre, diesel by Sh8.67, and kerosene by the largest margin of Sh9.65, which is expected to hit Kenyans hard, with the cost of essentials, including transport, food and manufactured goods, expected to go up. 

Epra has come under fire from Kenyans, who are now questioning the formula it uses in determining pump prices every month, dismissing it as a tool designed to guarantee profits for the oil sector players at the detriment of the economy.

There are also renewed calls to review petroleum taxes that account for nearly half of retail prices. 

Super petrol is now retailing at Sh186.31 per litre in Nairobi, up from Sh177.32 per litre over the pricing cycle to July 14.

Diesel is retailing at Sh171.58 per litre from Sh162.91, while kerosene will cost Sh156.58, up from Sh146.93.

Fuel prices have generally declined since November 2023, when the price of petrol hit a historical high of Sh217.36 a litre in Nairobi.

Epra on Monday evening attributed the steep hike to the high landed cost of petroleum products owing to the conflict between Iran and Israel.

The landed cost, the cost of fuel on reaching Kenya before it's loaded with taxes, levies and oil marketer margins, rose to Sh81.88 per litre of super petrol over the current pricing cycle from Sh76.72 in June. Diesel increased to Sh8.22 per litre from Sh77.30.

Despite the higher landed costs, global oil prices dropped, with a barrel of Murban crude oil going for $67.73 in June, up from $72.63 in May.

Kiharu MP Ndindi Nyoro criticised the sharp increase, terming the government’s explanation as misleading and incomplete.

He explained that the real problem lies in excessive taxation and the securitisation of fuel levies. Out of the Sh186.31 that Kenya will now pay at the pump for a litre of petrol, Sh82 or about 44 per cent will go to the government in the form of taxes and levies. 

“The only effective tool a government has to stabilise fuel prices is by adjusting the taxes. Unfortunately, that’s where the government is failing,” he said.

He also took issue with last year’s increase of the Road Maintenance Levy from Sh7 to Sh25 per litre of diesel and petrol from Sh18.

He also claimed that the government had used the road levy as collateral to borrow Sh175 billion. 

“This money is not reflected in the official debt books and never came to Parliament for approval. That raises serious accountability and legal questions,” Nyoro said.

“If we continue using public levies as collateral for loans without parliamentary oversight, what will stop future lenders from securitising our VAT, PAYE (Pay As You Earn), or NHIF (National Health Insurance Fund)? What will be left of Kenya’s financial sovereignty?” he posed.

He called for a public audit of all off-book borrowing and a national conversation on sustainable fiscal management.

The Institute of Economic Affairs (IEA) noted that there have been piecemeal increments that have resulted in prices going up by about Sh12 per litre in the last two years, and is now questioning Epra's method of arriving at pump prices.

IEA noted that the fuel capping formula is designed to guarantee profits for oil firms and appears to have little regard for the economy and the public. This is despite different sectors being heavily reliant on petroleum, and price increases tend to push up the cost of basic goods and services.

IEA noted that over the last two years, Epra has hiked various costs that are factored in computing pump prices, all adding about Sh12 to the retail prices.

In addition to the Sh7 hike on Road Maintenance Levy, the State doubled Value Added Tax to 16 per cent from eight per cent. There has also been the tripling of the Epra levy to 75 cents from 25 cents in February last year.

The latest was a March 2025 increase of the oil firm’s margins, which went up by Sh2.85 per litre of super petrol, Sh2.80 per litre of diesel and Sh2.73 per litre of kerosene (Sh2.73).

This increased the total margins for the oil firms to Sh15.24 per litre of super petrol from Sh12.29, while they will make Sh15.16 per litre of diesel from Sh12.36. The margin for kerosene increased to Sh15.09 from Sh12.36 per litre.

“Over the past two years, Kenya’s fuel pricing structure has undergone a series of notable shifts, with each one quietly adding weight to the final pump price,” said Fiona Okadia, an economist at IEA.

“These incremental adjustments are shaping a new normal in Kenya’s fuel pricing and deserve a closer look. This means that, all else being equal, the price of a litre of petroleum product has risen by a fixed amount of approximately Sh12 per litre over the past two years.”

The margins for the oil firms are set to go up further when Epra fully implements the recommendations of the Cost of Service Study in the Supply of Petroleum Products (Cossop).

The study, which reviews the different factors at play in the delivery of fuel to consumers, had proposed an increase of oil marketers’ margins by Sh7.80 per litre of super petrol, Sh7.75 for diesel and Sh7.67 per litre of kerosene. Epra had said it would increase the margins in phases.

Full implementation would push the margins to  Sh19.51 per litre of petrol from Sh12.39 a litre earlier this year.

Despite higher taxes, levies and margins, Epra has also scrapped petroleum subsidies that would cushion Kenyans from sudden price hikes. The subsidy, which Epra refers to as stabilisation, is funded by motorists, who pay Sh5.40 per litre of diesel and super petrol. The money should then be used to reduce the harsh impact a sudden increase in pump prices would have on the economy.

Epra has said its pricing formula factors prudently incurred costs by oil firms in determining the margins. Okadia noted that in adjusting margins through regulations as opposed to competition, the government could be protecting incumbents and not necessarily pricing efficiency.

“This creates fertile ground for rent-seeking behaviour, where firms use regulatory channels to secure guaranteed profits rather than improving efficiency or service. Over time, such structures risk entrenching market power,” she said. 

“Kenya’s fuel sector is far from a textbook competitive market. A handful of large players dominate fuel imports, and the retail space is increasingly consolidated under major brands.”

“In such a market, fixed and rising margins, especially when upward revisions happen without transparent scrutiny, begin to resemble cost-plus regulation.” 

Okadia said the economy would be better off if Epra abandoned the monthly price capping guide, in which it announces the maximum prices that oil marketers can charge motorists and instead adopt a situation where the oil firms compete. 

“Rather than entrenching administrative pricing based on opaque cost studies, often informed by industry players with a vested interest, Kenya would be better served by restoring competition in the petroleum products market,” she said.

“Competitive pricing, not centrally-determined margins, is what drives efficiency and ultimately protects consumers from unjustified cost escalations.”