All eyes on Epra as it announces May pump prices amidst fuel shortages

Kenyans will be anxiously waiting for today’s monthly fuel price review amidst concerns whether the government can sustain another round of deep subsidies to keep prices from further increase.

The government also has to contend with grumbling oil industry players who have, sources say, silently been protesting the subsidy by withholding petroleum products from the market as the government delays reimbursing them the money they forego at the pump to keep prices lower than would-be market rates.

Motorists have in recent weeks been grappling with fuel shortages across the country, which at some point the Ministry of Energy said was due to a technical and administrative hitch but industry insiders said was also partly due oil marketers holding products as they protested delayed payments.

The government now faces the dilemma of keeping subsidies on fuel, a move that has not been sitting well with oil dealers who have to go for months before they are reimbursed by the government, or doing away with the subsidies and normalising supply but also live with the impact of higher prices on the economy that is already being strangled by high cost of fuel.

While analysts expect prices of petroleum products imported to the country to remain largely the same, there are questions as to whether the government can sustain pump price subsidies. This is against the dwindling funds from the kitty but also push from oil marketing companies, which have been campaigning against the subsidy arguing that it has been hurting them due to delays in government reimbursing the money they forego at the pump.

Over the April-May cycle alone, the government spent an estimated Sh6.5 billion to cushion Kenyans from the sharp increase, although prices still went up by a steep Sh10 per litre of diesel and Sh9 for a litre of super petrol.

The money spent on subsidies is more than 23 per cent of the amount that was collected through the kitty over the year to June 2025. The kitty is funded by motorists at Sh5.40 per litre of diesel and petrol that goes into the Petroleum Development Levy Fund. 

The money is not solely spent on  stabilising pump prices but is also allocated to other areas for petroleum development. Over the year to June 2025, the government spent Sh13.18 billion from the kitty to subsidise fuel prices. This would mean that in one month, it has spent about half of what it spent in a whole year in its attempt to cushion Kenyans from a sharp spike in petroleum products.

The near-dry fuel subsidy kitty is also the reason that oil marketing companies are not reimbursed on time. In subsidising pump prices, the oil marketers forego the money which they later claim from the government. 

The arrears that the government owes the oil marketers could however, be fueling a silent protest among the oil firms, which according to an industry insider, could be among the causes of the shortages. 

“The government will face that dilemma on Thursday because it will now have to either the bullet and hike the price by Sh24 so that there's no subsidy or give a subsidy and continue piling up money owed to the oil marketers,” he said, adding that retaining the subsidy without paying reimbursements owed to the industry for subsidies given over past pricing cycles including April-May would likely expose Kenyans to further fuel supply hiccups.

The source, who sought anonymity for fears of reprisals from both government and industry, noted this scenario has been playing out in recent weeks as some marketers fear the increase in the money the government owes them but also the impact it has had on their cash flows and now have to rely on costly overdrafts and loans to sustain operations.

“The subsidy on diesel is much higher and that is why it is the most affected, while petrol remains largely unaffected because the subsidy is much lower and within the margins of the OMCs,” said the source.

The government subsidised diesel by Sh22.15 per litre, petrol at Sh4.34 and kerosene at Sh89.41. Oil markets make a margin of Sh17 per litre across the three petroleum products whose prices are regulated, which  might mean that without reimbursement of the Sh22 per litre of diesel, for instance, they might be running in deep losses.

Without the subsidy, diesel would be retailing at Sh218.78 per litre in Nairobi much higher than super petrol, whose pump price would be at Sh201.94. Kerosene, which took the highest subsidy of Sh89, would be retailing higher than both fuels at Sh242.19 per litre at the capital.

Diesel is heavily subsidised because of its heavy use in industries such as transport, agriculture and manufacturing. A rise in the cost of diesel results in high cost of essential goods. In April, the higher cost of fuel resulted in inflation increasing to 5.6 per cent from 4.4 per cent in March.

“It makes sense to subsidise pump prices especially for diesel because of the sectors that rely on it.  But we also have a government that doesn't keep its promises. If they were paying the subsidies on time, then there would be no sortages.. I think if these arrears were paid, there would have been no shortages right now,” said the source.

The government is estimated to owe marketers Sh15 billion as at April.