Pressure Grows to Cut Fuel Taxes as Prices Stay High Despite Global Drop.

Growing pressure is mounting on the government to reduce fuel taxes after fresh analysis showed Kenyan consumers are paying significantly higher pump prices despite a sharp drop in global oil costs.

Stakeholders are now urging the State to scrap the 8% Value Added Tax (VAT) introduced in 2023 and reverse the additional KSh 7 fuel levy imposed in 2024, arguing that the current tax burden is stifling the economy and shielding inefficiencies within the pricing structure.

“Consumers carried the burden when global prices were high. Now that prices have fallen, it is time for the government to reciprocate,” one policy analyst noted. “Kenyans must be shielded. The economy must be supported.”

Global crude oil prices, which peaked at over $116 per barrel in May 2022, have since declined to below $55 per barrel by December 2025—more than a 50 percent drop. However, this shift has not been reflected at Kenyan fuel pumps. In 2022, petrol retailed at approximately KSh 150 and diesel at KSh 131 even at peak global prices, figures that remain lower than current retail rates.

Analysts attribute the disconnect to increased taxation, with VAT alone contributing over KSh 25 per litre, alongside multiple excise duties and levies. Combined, taxes are estimated to account for nearly half of the retail fuel price in Kenya placing the country among the highest globally in fuel taxation.

“The problem is no longer global oil prices. It is domestic taxation,” the analyst added. “For a non-oil-producing country like Kenya, taxes and levies are the only real levers and they are currently being overused.”

Further controversy surrounds the KSh 7 fuel levy, which critics claim has already been securitised—effectively collected in advance through financial arrangements estimated to raise about KSh 32 billion annually.

“This kind of securitisation raises serious legal and ethical questions,” an industry insider said. “If the funds have already been advanced, then financial institutions involved must share the burden whether through a moratorium or legal review.”

Comparisons with regional markets have intensified the debate. Fuel prices in neighbouring countries—including Uganda, Tanzania, and Rwanda remain significantly lower, despite Kenya serving as a key transit corridor for petroleum imports.

“It is unfathomable that fuel is cheaper in Uganda when their supply passes through Kenya,” the analyst observed. “This signals a structural issue in our pricing model.”

Economists warn that sustained high fuel costs risk slowing economic activity by increasing the cost of transport, production, and basic goods—ultimately passing the burden to households already grappling with a high cost of living.

With pressure building, attention is now shifting to whether the government will adjust fiscal policy to ease the burden or maintain current tax measures to support revenue needs.

“The choice is clear,” the analyst concluded. “Support the economy now, or risk deeper economic strain in the long run.”