Why Kenyans Now Pay More In Taxes Than Fuel Itself At The Pump

Fuel Taxes in Kenya Cross the Line: Consumers Paying More in Levies Than Petrol

Kenyans are now paying more in taxes and levies than the actual cost of fuel itself. Yes, you read that right. A breakdown of the latest fuel prices shows that taxes on petrol now stand at Sh80.50 per litre, more than the actual product cost of Sh76.72. The final petrol price in Nairobi is Sh174.63 per litre, which includes dealer margins and other charges.

This puts the spotlight on Kenya’s fuel taxation structure, with experts and citizens asking if it’s sustainable—or even fair.

What’s Behind the Soaring Petrol Prices?

Taxation Still High Despite Falling Global Prices

Interestingly, landed costs—which include the cost of the fuel product and freight—have dropped by 2.95%, according to the latest update by Kenya’s energy regulator. But taxes are fixed, since most are set amounts or percentages. So pump prices stay high even when the cost of fuel on the global market drops.

This is the first time in Kenya’s history that taxes and levies have exceeded the actual cost of petrol in pricing.

Why Does the Government Rely So Heavily on Fuel Taxes?

Fuel is used across every sector of the economy. So, it’s an easy target for tax collection. The Ministry of Energy, National Treasury, and Parliament are the key players in crafting and approving fuel taxation policies.

Despite public outcry, they have continued to raise taxes on fuel, ignoring the economic pain on ordinary Kenyans. The logic is simple: tax more, collect more. But experts warn this is short-sighted.

Experts Say It’s Time for a Smarter Approach

According to John Mutua, Programmes Coordinator at the Institute of Economic Affairs Kenya, this way of heavy taxation on fuel is flawed.

“Trying to collect more in the form of high taxes on fuel is a myopic argument. It’s better to have a moderate rate to incentivize consumption as opposed to having high taxation then introducing subsidies,” he said.

Mutua says Kenya needs an evidence-based redesign of its taxation model—one that supports both economic growth and fair revenue collection.

Government Breaks Promise on Road Levy

Fuel taxes like the Road Maintenance Levy (RML) were once tied to specific promises. In July last year, Transport CS Kipchumba Murkomen said he would not raise the RML unless global oil prices fell. He broke that promise. The government went ahead and increased RML from Sh18 to Sh25, making fuel even more expensive.

The argument for RML is that it funds road infrastructure. But as Mr. Mutua says, while the purpose may be valid, the rate should be reviewed to encourage fuel use and broader economic benefits.

Rising Fuel Costs Trigger National Outcry

The Kenyan public has not taken these tax hikes lightly. The increase in RML was followed by a VAT hike to 16% on fuel—sending prices soaring above Sh200 per litre for the first time ever. In September 2023, petrol hit Sh211.64 and diesel hit Sh200.9.

Add to that the tripling of the Petroleum Regulatory Levy to Sh0.75 in February 2024, and it’s easy to see why Kenyans are fuming.

Kenya’s Fuel Among the Most Expensive in East Africa

In comparison with neighboring countries, Kenya’s fuel is clearly overpriced due to excessive taxation. Check out the figures:

• Petrol per litre:

  • Nairobi: $1.35

  • Kampala: $1.32

  • Dodoma: $1.09

• Diesel per litre:

  • Nairobi: $1.27

  • Kampala: $1.26

  • Dodoma: $1.06

These differences underscore the adverse impact of Kenya’s tax-heavy pricing, especially considering that Kenya imports all its petroleum products.

A Slight Break in the Finance Bill 2025

There is, however, a small silver lining. Unlike in previous years, the Finance Bill 2025 has not proposed any new taxes on fuel. This could mean some breathing room for consumers, but it doesn’t undo the heavy burden already in place.