OPINION: Beyond the pump - The real economic lesson from Kenya’s fuel crisis

Fuel is not merely a commodity consumed at the pump. It is a strategic enabler of productivity, trade, mobility, food security, manufacturing, and public service delivery and when its price rises sharply, every sector of the economy and every household feels the strain.

Earlier this month, petrol in Nairobi rose to Ksh.214.25 per litre and diesel climbed to a historic Ksh.242.92 per litre. The immediate reaction from transport operators, businesses, and consumers reflected the central role fuel plays in determining both the cost of living and the cost of doing business. The Government’s subsequent engagement with stakeholders and measures aimed at easing diesel prices were therefore timely and welcome, but it was a response, not a solution. The real economic lesson from this crisis lies beyond the pump.

The numbers make our dependence plain. According to the 2026 Kenya National Bureau of Statistics Economic Survey, the transport and storage sector alone consumed petroleum products valued at approximately Ksh.550.7 billion. National demand grew from 5.2 million tonnes in 2024 to 5.7 million tonnes in 2025, with diesel consumption exceeding 2.4 million tonnes. Kenya imports every litre of its refined petroleum, leaving us fully exposed to global oil market volatility, geopolitical tensions, and the depreciation of the shilling, which ensures that even when global crude prices ease, relief at the pump is partial at best.

The consequences are particularly severe for Small and Medium Enterprises (SMEs), which form the backbone of Kenya’s economy. Many lack the financial buffers necessary to absorb sudden cost increases. Higher fuel prices translate directly into reduced profitability, constrained growth, and increased pressure on employment. Rising logistics and production costs also undermine Kenya’s competitiveness within the region. But 80 per cent of Kenya’s workforce in the informal economy boda boda operators, market traders, jua kali artisans are hit harder still. Their losses do not appear in corporate accounts. They appear in fewer trips made, thinner margins, and children kept home when school fees cannot be met.

Perhaps the most pressing issue exposed by the fuel crisis is the shrinking disposable income of Kenyan households. Even before the recent fuel price increases, many salaried workers were already grappling with reduced take-home pay due to PAYE obligations, Affordable Housing Levy contributions, SHIF deductions, and higher NSSF rates.

The result is a narrowing of household purchasing power at precisely the moment when the prices of essential goods and services are rising. A more progressive PAYE structure with wider tax bands and lower marginal rates would restore spending power, stimulate demand, and ultimately broaden the tax base. Protecting household incomes is not a welfare measure; it is an economic stabilisation tool.

The urgency of these interventions becomes clearer when viewed against Kenya’s recent progress in managing inflation. Inflation declined from 4.5 per cent in 2024 to 4.1 per cent in 2025, while transport inflation fell from 5 per cent to 3.2 per cent.

These hard-won gains are now directly at risk. Fuel shocks cascade into food prices, manufacturing costs, and public service delivery budgets at the county level. Allowing them to pass through unchecked is a policy choice, not an inevitability.

What Kenya requires is a structural reform. A Strategic Petroleum Reserve Act should mandate a minimum 90-day domestic reserve, funded through a transparent, auditable levy. A price-smoothing mechanism of the kind operating in Chile, Malaysia, and India should prevent global volatility from being transmitted immediately and in full to consumers.

A review of the fuel tax architecture should seek a balance between revenue mobilisation and economic competitiveness. Inefficiencies in fuel clearance and supply chains must be addressed. At the same time, the country should accelerate investments in electric mobility, charging infrastructure, and strategic fuel reserves to strengthen resilience against future shocks.

Yet structural reform means little without accountability for what has already been collected. Parliament’s Public Investment Committee on Commercial and Energy Affairs recently directed the Auditor-General to carry out a forensic audit of revenue generated by the Kenya Roads Board from the fuel levy for the financial years 2020/21 to 2022/23, a direct response to a Ksh.2.76 billion unreconciled variance between what KRB recorded as payable to the Kenya Urban Roads Authority and what KURA recorded as receivable.

The Auditor-General had already flagged that Road Maintenance Levy Fund receivables of Ksh.5.18 billion “could not be confirmed.” This is not an isolated discrepancy. A prior special audit found that Ksh.18.14 billion from the Petroleum Development Levy Fund was illegally redirected to road construction projects, while a further Ksh.4.54 billion was transferred to the Ministry of Energy for purposes unrelated to petroleum. In 2024/25, KRA collected a record Ksh.119.7 billion from the Roads Maintenance Levy alone. Motorists are paying more than ever. The question is whether they are getting what they paid for.

ICPAK’s role in this conversation extends beyond tax reform. As the professional body representing accountants in Kenya, we should be demanding accountability and transparency of the billions collected through fuel levies each year, including the Petroleum Development Levy and the Road Maintenance Levy. Accountability for public revenues is not merely a technical exercise. It is a civic and moral obligation, and we intend to pursue it.

Sustainable prosperity will come from a country that has built strategic reserves, reformed its price architecture, protected the purchasing power of its workers, and structured its institutions to manage energy as the national asset it is, not the revenue instrument it has become.

That is the real economic lesson from Kenya’s fuel crisis. The question is whether we are ready to act on it.

[The writer is the Chairperson of the Institute of Certified Public Accountants of Kenya (ICPAK)]