Trade lobbies warn of higher living costs on fuel price hike

Manufacturers and traders have raised alarm over the latest fuel price increase, warning that ordinary Kenyans and businesses will bear the full weight of soaring transport and production costs in the coming weeks.

The concerns follow Thursday’s announcement by the Energy and Petroleum Regulatory Authority (EPRA), which pushed the price of diesel up by Sh46.29 per litre to Sh242.92 in Nairobi, while super petrol rose by Sh16.65 to Sh214.25 per litre for the pricing cycle ending June 14.

Business lobby groups say the sharp jump in diesel prices poses the biggest threat to the economy because diesel powers transport, agriculture, manufacturing, logistics, construction, and trade.

The Kenya National Chamber of Commerce and Industry (KNCCI) warned that the increase will significantly raise the cost of moving goods, producing commodities, and delivering services, ultimately pushing up the cost of living for households already struggling with high prices.

“The current fuel increase is not just an energy issue; it is an economy-wide shock,” the chamber said in a statement, urging the government to move quickly to cushion consumers and businesses.

KNCCI acknowledged that global oil market disruptions linked to geopolitical tensions in the Middle East have contributed to rising prices.

However, it argued that domestic taxes, levies, and other local costs are worsening the situation in Kenya.

According to the chamber, while global crude oil prices increased by about 10.7 per cent between April and May, Kenya’s diesel price jumped by 23.5 per cent over the same period.

The latest EPRA review shows diesel recording the steepest rise among petroleum products, climbing from Sh196.63 in April to Sh242.92 in May.

Petrol increased from Sh197.60 to Sh214.25, while kerosene remained unchanged at Sh152.78.

Since January, petrol prices have risen by 17.4 per cent, while diesel prices have surged by 42.5 per cent, confirming what KNCCI termed a “diesel-led fuel shock” with far-reaching economic consequences.

The chamber said Kenya remains one of the most expensive fuel markets in the region, weakening the country’s competitiveness in logistics, manufacturing and cross-border trade.

A comparison of regional retail fuel prices shows diesel in Kenya is significantly costlier than in neighbouring countries.\

Uganda’s diesel retail price stands at about Sh174.37 per litre, roughly 28 per cent lower than Kenya’s, while Tanzania sells diesel at around Sh211.40 per litre. Burundi and Ethiopia also posted lower diesel prices than Kenya.

Only Rwanda recorded a higher petrol price than Kenya, although its diesel cost remained lower.

KNCCI warned that the high fuel costs are likely to increase transport and logistics expenses by between 10 and 20 per cent, push food and consumer goods prices up by as much as seven per cent, and raise manufacturing and farm distribution costs by up to 12 per cent.

Small businesses are also expected to suffer shrinking cash flows and profit margins as operating expenses rise.

The chamber blamed the widening gap between global crude prices and local pump prices on what it described as “domestic cost build-up,” including taxes, levies, exchange rate pressures, landed product costs and fuel margins.

It now wants the government to urgently review and rationalise fuel taxes and levies, especially those imposed on diesel, while strengthening transparent fuel price stabilisation mechanisms.

The trade lobby has also called for publication of a detailed fuel price build-up during every review cycle, targeted support for fuel-intensive small businesses, and measures to cut inefficiencies in transport, storage and distribution.

It has further urged Kenya to diversify oil imports toward African oil-producing nations to reduce shipping costs and take advantage of continental trade agreements.

The chamber has backed plans for regional refining investments, including recent announcements by the Dangote Group, while calling on the government to fast-track development of a modern local refinery to reduce dependence on costly refined fuel imports.

Manufacturers have equally expressed concern over the impact of the fuel hike on industrial production and consumer prices.

While welcoming the government’s earlier decision to lower VAT on fuel from 16 per cent to eight per cent, industry players said more interventions are needed because taxes, fees, and levies still account for nearly half the retail cost of fuel.

Kenya Association of Manufacturers (KAM) has proposed a temporary reduction or removal of some levies, including the Road Development Levy, to cushion businesses and consumers.

The association has asked the government to inject liquidity into the economy by clearing outstanding VAT refunds estimated at Sh35 billion as of February 2026 and increasing monthly allocations for VAT claims from Sh3 billion to Sh5 billion.

In addition, they called on the State to prioritise locally manufactured goods in public projects through the government procurement system, saying this would support local industries and stimulate economic activity amid rising operating costs.