Kenyan consumers are unlikely to fully benefit from the recent decline in global fuel prices during the June 15 fuel price review following changes to the country’s petroleum pricing formula. The revised framework alters how imported fuel cargoes are valued, effectively delaying the transmission of lower international fuel prices to local consumers.
Under the new pricing mechanism, petroleum cargoes delivered between May 10 and May 31 will be priced using the average global fuel prices recorded in April, while shipments arriving between June 1 and June 9 will be valued using May’s average prices. Previously, cargoes arriving during the second half of a month were priced using the same month’s international benchmarks, allowing consumers to benefit more quickly from market declines.
The timing of the adjustment is significant because global fuel prices experienced a substantial decline in May. According to international commodity pricing data, diesel prices dropped by 19.7 percent from $1,409.28 per tonne in April to $1,132.04 per tonne in May. Jet fuel prices fell even more sharply, declining 23.4 percent from $1,526.69 per tonne to $1,167.92 per tonne over the same period.
The decline was largely driven by easing geopolitical concerns surrounding the Middle East and growing market optimism regarding a potential diplomatic breakthrough between the United States and Iran. These developments contributed to a nearly 20 percent drop in Brent crude oil prices during May, marking one of the steepest monthly declines since 2020.
However, the revised formula means that much of May’s lower pricing will not be reflected in Kenya’s June fuel review. Industry estimates suggest that the delay could generate significant gains for importers. Simulations indicate that diesel cargoes imported during the period could result in gains of approximately Sh6.08 billion, while dual-purpose kerosene imports may generate about Sh3.7 billion.
The government maintains that the revised methodology is intended to improve transparency and consistency in fuel pricing. Authorities argue that previous pricing practices occasionally allowed market distortions that disadvantaged consumers, particularly when cargo pricing periods were shifted between monthly review cycles.
The adjustment comes at a sensitive time for Kenya’s economy. Fuel costs have become a major contributor to rising inflation following disruptions linked to tensions in the Middle East. Public transport operators recently staged protests over higher fuel costs, prompting government intervention and a temporary Sh10 per liter reduction in diesel prices.
The president’s administration has already spent an estimated Sh28.1 billion subsidizing fuel prices between April and June in an effort to cushion households and businesses. The latest formula change could increase pressure on public finances if the government seeks to maintain lower retail fuel prices through additional subsidies.
The economic implications extend beyond fuel stations. Kenya’s inflation rate accelerated to 6.7 percent in May from 5.6 percent in April, reaching its highest level since January 2024. Rising fuel prices have contributed significantly to increased transport and production costs, reducing household purchasing power and adding pressure to businesses.
Higher inflation also complicates monetary policy decisions. The Central Bank of Kenya has been gradually easing interest rates to support economic activity, but persistent inflationary pressures may limit its ability to implement further rate cuts in the near term.
While the government argues that the revised pricing formula will ensure fairer fuel pricing over the long term, the immediate effect appears to be a delay in passing global fuel price reductions to consumers. For households already grappling with elevated living costs, the expected relief from falling international oil prices may take longer to materialize than initially anticipated.
