How fuel prices are calculated in Kenya

The Energy and Petroleum Regulatory Authority (EPRA) has been on the receiving end this week, with the majority of Kenyans angered by the recent rise in pump prices.

EPRA’s fuel review on Monday brought jitters among the public after the cost of petrol, diesel, and kerosene increased by Ksh.8.99, Ksh.8.67 and Ksh.9.65 per litre, respectively.

As a result, a litre of petrol now goes for Ksh.186.31 in Nairobi, while diesel sells at Ksh.171.58 and kerosene retails at Ksh.156.58.

The regulator attributed the increase to higher landed costs of petroleum products, with the average landed cost of Super Petrol rising by 6.45%—from Ksh.76,436 per cubic metre in May to Ksh.81,169 in June 2025. Similar increases were noted for diesel and kerosene, largely driven by global oil market trends, freight charges, and exchange rate fluctuations.

Treasury Cabinet Secretary John Mbadi recently echoed EPRA’s explanation, citing global market disruptions—including the Israel-Iran war—as a major contributing factor.

Energy Cabinet Secretary Opiyo Wandayi has since sought to calm public outrage, assuring Kenyans that the current spike is a one-off and that prices are expected to drop in the coming months.

Still, the public continues to question the process behind the ever-changing fuel costs. So, how exactly does EPRA calculate these prices?

Fuel prices in Kenya are determined through a formula introduced under the Petroleum Pricing Regulations, 2022 which is applied by EPRA every 14th of the month, with new prices taking effect from the 15th.

According to EPRA, the pricing model takes into account:

• International crude oil prices, which influence the cost of refined petroleum products.
• Exchange rate fluctuations, particularly the USD/KES rate, which affects importation costs.
• Local taxes and levies, such as excise duty, the petroleum development levy, and the road maintenance levy.
• Freight and insurance charges for cargo brought through the Port of Mombasa.
• Storage and distribution costs from depots to retail stations.
• Margins for oil marketers and dealers, which are regulated to ensure fair pricing.

One critical component of the formula is the weighted average cost of fuel cargoes imported and discharged at the Port of Mombasa between the 10th of the previous month and the 9th of the current pricing month.

These components are not arbitrary. EPRA says they are guided by findings from a Cost-of-Service Study—an in-depth review that incorporates stakeholder and public participation.

The most recent study came into effect in February 2025 and is meant to reflect the actual cost structures within Kenya's fuel supply chain.

EPRA’s mandate to compute and publish fuel prices is derived from Section 101(y) of the Petroleum Act, 2019, and Legal Notice No.192 of 2022. The law allows the authority to determine the maximum wholesale and retail prices of petrol, diesel, and kerosene sold locally.

While the formulas and regulations are in place to ensure transparency, many consumers remain unconvinced, especially in the wake of steep and regular price hikes.