(NAIROBI, KENYA) – Transport costs in Kenya have surged to their highest level in eight years after the government exhausted funds meant to cushion consumers from rising petroleum prices.
Transport inflation jumped to 17.1% in October from 15.6% in September. This is the highest rate since September 2018, when the government first introduced Value Added Tax on petroleum products.
The government withdrew fuel subsidies in October for the first time since August 2025. This ended a programme that had shielded consumers from the full impact of rising international oil prices.
The Petroleum Development Levy Fund was depleted after months of heavy spending to keep pump prices low following the outbreak of conflict in the Middle East in February.
The fund is financed through a levy of KES 5.40 ($0.04) on every litre of petrol and diesel, and KES 0.40 ($0.003) on kerosene. However, the prolonged oil price shock exhausted the resources available to keep domestic fuel prices in check.
An October analysis by the International Monetary Fund found that Kenya passed on up to 62% of changes in international fuel prices to consumers between February and September.
The country passed on 52% of changes in the landed cost of super petrol to retail prices. The pass through for diesel was higher at 62%, reflecting the greater exposure of consumers to changes in the cost of the fuel that powers much of the economy.
At the height of the oil price shock, Kenya provided a record subsidy of KES 34.07 ($0.26) per litre of diesel to prevent a steep jump in pump prices in the pricing cycle ending 14th July.
The government withdrew the support last month. The Energy and Petroleum Regulatory Authority said it needed to preserve resources against future supply disruptions and higher global demand during Europe’s winter.
“The decision we have taken today (removing subsidy) is meant to ensure that we save enough money for the future,” Epra Director General Edward Kinyua said on 14th October.
“Europe is going into winter and this will trigger a surge in demand for diesel and kerosene, and thus lead to a sharp rise in global prices of the two products.”
The withdrawal resulted in steep increases in domestic fuel prices. Motorists paid an average of KES 227.85 ($1.75) per litre of super petrol in October, 22.8% above the KES 185.59 ($1.43) charged a year earlier.
Diesel prices climbed 32.5% to KES 228.77 ($1.76) per litre from KES 172.64 ($1.33), raising operating costs for public transport operators, farmers and manufacturers.
Kerosene, used by low income households for lighting and cooking, recorded a steeper increase of 41.6% to KES 220.88 ($1.70) per litre from KES 155.96 ($1.20), adding to the energy burden on poorer families.
The higher fuel costs have translated into more expensive journeys. Public transport operators raised fares on several routes by between 25% and 30% in October compared with a year earlier, according to the Kenya National Bureau of Statistics.
On the Karbanet to Nakuru route, passengers paid KES 650 ($5.00) in October, up from KES 500 ($3.85) a year earlier and KES 600 ($4.62) in September. In Nairobi, matatu fares from Westlands to Kangemi rose to KES 50 ($0.38) from KES 40 ($0.31), while boda boda charges between Siaya town and Awelo increased to KES 70 ($0.54) from KES 50 ($0.38).
The increases threaten to push up the prices of food and other consumer goods because diesel powers public transport, agricultural machinery, industrial equipment and the movement of merchandise across the country.
The October transport inflation reading is approaching the 17.29% recorded in September 2018, when the Uhuru Kenyatta administration introduced an 8% VAT on petroleum products through the Finance Act 2018.
The tax had been deferred after its enactment in 2013 and was initially implemented at half the standard 16% rate following public opposition to the cost of living impact.
President William Ruto’s administration raised the rate to 16% in September 2023 before cutting it to 8% from 15th April this year as the war involving the US, Israel and Iran drove up international petroleum prices.
The current transport price shock remains below the historical peak of 28.03% recorded in November 2011, when Kenya faced a severe inflation crisis marked by a sharply depreciating shilling and soaring food prices.
The price pressures are widening across the economy. The annual inflation rate accelerated to a 40 month high of 7.32% in October from 6.76% in September, nearing the top of the government’s 2.5% to 7.5% target range.
NCBA Group research analysts said the government’s reduced capacity to subsidise petroleum products had shifted the immediate economic concern towards inflation. This is despite the extension of the 8% VAT rate on fuel for another 90 days.
“The immediate concern has shifted decisively towards inflation,” the analysts said in their November 2026 Economic Report released on Monday.
They projected inflation of between 7% and 7.5% in December if international oil prices do not reverse significantly. They warned that the risk of the Central Bank of Kenya tightening monetary policy had increased.
The next inflation reading, they said, would be crucial in shaping expectations ahead of the Monetary Policy Committee’s December meeting.