Market Intelligence · Kenya Business
Crude oil above $100. An ERC review that was always going to move in one direction. And a Kenyan economy absorbing the shock from every angle simultaneously.
Kenya’s pump prices do not move with the market in real time — they are reviewed and adjusted by the Energy and Petroleum Regulatory Authority (EPRA, formerly ERC) on a fixed mid-month cycle. For most of the past two years, that mechanism provided a degree of predictability. Businesses could plan around known adjustment windows. That predictability is now gone. The Strait of Hormuz closure, which has been in effect since 2 March 2026, has pushed Brent crude above $100 per barrel — with some benchmarks hitting $126 — and the mid-March EPRA review has delivered a smallish upward adjustment to pump prices across the country. This is not the end of the adjustment cycle. It is the beginning of it.
How Kenya’s fuel pricing actually works — and why this moment is different
Kenya imports refined petroleum products, primarily through the Mombasa port and the Kenya Pipeline Corporation network. The landed cost of those products is directly tied to global crude benchmarks. When Brent rises sharply, Kenya’s import cost rises with it — and EPRA’s monthly review translates that into the pump price Kenyans pay. There is typically a one-to-two month lag between a global price movement and its full transmission into the Kenyan pump price. This means the increases already visible at the pump in March reflect crude prices from late January and February. The sustained elevation above $100 from early March has not yet been fully priced in. Further adjustments are likely at the April review.
What makes this moment structurally different from previous fuel price cycles is that the underlying cause — the Hormuz closure — has no historical precedent and no confirmed resolution timeline. Previous oil price spikes, including those in 2022 following the Russia-Ukraine war, resolved partially within months as supply chains adjusted. The complete closure of the world’s most critical oil transit chokepoint is a different category of event. Businesses that plan their cost base around an early normalisation may be making an expensive assumption.
The direct cost channels: where fuel hits your business
Fuel price increases do not arrive as a single line item. They enter a business through multiple channels simultaneously, and the cumulative effect is larger than any individual item suggests.
Transport and logistics
This is the most immediately visible channel. Every truck that moves goods — raw materials inbound, finished products outbound — runs on diesel. Transporters adjust their rates in response to pump price increases, either through formal fuel surcharges or through renegotiation at contract renewal. Businesses that distribute across Kenya’s counties, or that receive materials from upcountry suppliers, will see these costs reflected in quotations and invoices within weeks of each EPRA adjustment. For businesses operating thin-margin distribution models, a 15–20% fuel cost increase can eliminate profitability on routes that were previously viable.
Manufacturing energy costs
Manufacturers — including packaging producers, millers, food processors, and building materials companies — consume significant quantities of heavy fuel oil, diesel, and in some cases LPG for process heat, extrusion, drying, and power generation. Many manufacturers supplement or substitute KPLC grid power with diesel generators, particularly during load-shedding events. When pump prices rise, the effective cost of every unit of output rises with them. This is not a cost that can be easily engineered away in the short term — it is embedded in the production process.
Agriculture: from farm to market
Fuel is embedded at every stage of Kenya’s agricultural value chain. Irrigation pumps, tractors, post-harvest drying equipment, cold chain refrigeration, and the trucks that carry produce to Nairobi, Mombasa, and export terminals all run on fuel. A fuel price increase is therefore a food price increase — not immediately, but inevitably. Smallholder farmers who hire transport to move produce to market face higher costs per kilogramme moved. Agri-processors face higher inbound logistics costs. Exporters face higher freight to the port. These costs accumulate through the chain and eventually reach the consumer.
Generator dependency and the KPLC interaction
Kenya’s electricity tariff structure includes a fuel cost charge component that adjusts with global fuel prices. This means that even businesses drawing entirely from the KPLC grid will see their electricity bills increase as fuel prices rise — without touching a litre of diesel themselves. For energy-intensive operations such as cold storage, cement production, textile manufacturing, and large-scale milling, this transmission channel can be material. Businesses that switched to solar or battery systems in recent years are partially insulated, but the majority of Kenyan industry remains grid- or generator-dependent.
The compounding factors unique to this cycle
Previous fuel price cycles in Kenya — 2011, 2014, 2022 — arrived in isolation or alongside one or two other pressures. The current cycle is different because it arrives simultaneously with a cluster of other cost increases that share the same root cause.
| Cost Driver | Direction | Link to Fuel Crisis | Timing |
|---|---|---|---|
| Pump fuel (diesel / petrol) | ▲ Significant continued increases | Direct — EPRA adjustment | Now |
| KPLC electricity tariff | ▲ Upward pressure | Direct — fuel cost charge | 1–2 months |
| PP resin / packaging materials | ▲ Sharply higher | Crude oil → naphtha → resin | Now |
| Inbound logistics / freight | ▲ Higher | Transporter fuel surcharges | Now |
| Food prices / CPI | ▲ Building | Agri transport + processing costs | 1–3 months |
| KES / USD exchange rate | ▼ Depreciation pressure | Current account pressure, import costs | Building |
| Wage pressure | ▲ Building | Cost of living → employee demands | 3–6 months |
The shilling is a particularly important compounding factor. Kenya is a net importer of petroleum — every litre is purchased in US dollars. If the shilling depreciates against the dollar while crude prices are elevated, the KES cost of fuel rises further even if the global USD price holds steady. The CBK has limited room to intervene aggressively without constraining growth, and the current account pressure from reduced diaspora remittances (covered in detail in our Wider Kenya Economy post) adds further weight to that dynamic.
What businesses should do now
Reprice your logistics assumptions immediately
If your business uses standard cost models or annual freight budgets, those figures are now materially understated. Review your transport contracts and understand whether your logistics partners operate on fixed rates or apply fuel surcharges. If surcharges apply, model what a further 10–15% pump price increase would cost you — because the April EPRA review may deliver one.
Review your energy cost exposure
Map your energy spend across grid, generator, and process fuel. Understand which elements are exposed to KPLC tariff adjustments and which are directly tied to pump prices. For manufacturers, this exercise often reveals that energy is 8–15% of total cost of goods — a figure that can shift significantly in a sustained high-fuel environment.
Buy forward on inputs where possible
For businesses that consume packaging materials, raw materials, or other petroleum-derived inputs, the case for buying forward is stronger now than it has been in years. Prices are elevated but supply is still available. If the Hormuz closure persists through Q2, availability from Gulf origins will tighten further. The risk of waiting is not just higher prices — it is no availability at any price on short notice.
Protect your working capital position
Running the same business at the same volume now requires materially more working capital than it did in January. If your overdraft or trade finance facility was sized for a lower-cost environment, it may be insufficient to cover forward purchasing at current prices. Engage your bank now — before you are under pressure — to review facility limits and terms. Banks are more accommodating when approached proactively than when approached in a cash crisis.
Communicate with your customers early
If rising costs will require you to adjust your pricing or payment terms, the conversation is significantly easier when it is initiated by you, in advance, with clear data behind it. Customers who understand the market context — crude above $100, EPRA adjustments, resin repricing — are far more likely to accept a well-explained price adjustment than one that arrives without context. The businesses that handle this well will protect their relationships. Those that absorb the costs silently until they cannot will face a harder conversation later, from a weaker position.
Market Outlook
Kenya’s fuel price environment is elevated and is likely to remain so for as long as the Strait of Hormuz closure continues. The April & May EPRA reviews will reflect crude prices that have been sustained above $100 for the full month of March. The electricity tariff adjustment will follow one to two months after that. Wage pressure will build through the second and third quarters as the cost of living rises. Businesses that are planning around a near-term return to 2025 cost levels are planning for a scenario that is not currently supported by any available evidence. The companies that will come through this period in good shape are those that acknowledge the new cost reality now, adjust their models accordingly, and act before their options narrow.