Fuel Prices Surge: CS Mbadi Explains 80% Diesel Increase

Treasury Cabinet Secretary John Mbadi has clarified the reasons behind the sharp increase in fuel prices in Kenya, attributing it directly to the US-Iran conflict’s effect on global oil markets. He detailed the measures implemented by the government to mitigate the impact on Kenyan citizens. During an interview with TV47, Mbadi explained that the issue began on February 28, 2026, when US President Donald Trump initiated hostilities with Iran. At that time, international diesel prices were USD 642 per metric ton. Current prices have risen to USD 1,120 per metric ton, marking an increase of more than 80 percent. The surge represents the primary challenge facing Kenya, he noted, adding that the country has been more fortunate than others where fuel availability is as much a concern as price, with some nations encouraging citizens to work remotely to conserve resources. Fortunately, we have fuel availability guaranteed. Our challenge lies with the price, he explained. Mbadi outlined two approaches the government considered to address escalating fuel costs: subsidies or tax and levy reductions. He confirmed that authorities have aggressively pursued both strategies. Prior to the crisis, authorities had established a stabilization fund amounting to approximately Ksh 16.7 billion. As higher prices began affecting Kenya in April, the government allocated Ksh 6.2 billion from the fund to protect consumers, retaining the remainder due to uncertainty regarding the conflict’s duration. Concurrently, fuel VAT was lowered from 16 percent to 8 percent, a modification requiring parliamentary approval as legislation permitted the Treasury CS to reduce it only to a maximum of 12 percent. With May’s arrival and international prices surpassing expectations, authorities allocated an additional Ksh 5 billion from the remaining Ksh 11 billion in the fund. Ksh 4.5 billion was specifically earmarked for diesel, which Mbadi identified as the most widely used fuel in Kenya’s economy, while Ksh 500 million was allocated to kerosene. Petrol received no financial support. Despite these measures, Mbadi acknowledged that prices continued to rise as the subsidies proved insufficient to fully offset the magnitude of the international price surge. Following consultations with matatu sector representatives and other stakeholders on Monday and Tuesday this week, the government approved the release of an additional Ksh 2.7 billion from the remaining Ksh 5 billion in the fund to further support diesel prices, resulting in the recent price reduction. The government is implementing all possible measures to ensure petroleum product prices decrease to protect our economy, as escalating prices lead to increased inflation, he emphasized.