Petrol, diesel up by Sh17 and Sh46 respectively in May-June pricing

Kenya's Energy and Petroleum Regulatory Authority (EPRA) has announced significant fuel price adjustments for the May-June 2026 review cycle, with Super Petrol climbing by Sh16.65 per litre and Diesel surging by Sh46.29 per litre—marking the steepest diesel increase in months. Kerosene prices remain frozen, a rare stabilization measure that underscores the selective nature of EPRA's intervention strategy.

## Why Are Diesel Prices Jumping So Dramatically?

The 46-shilling spike in diesel represents a 12.4% monthly increase, significantly outpacing petrol's 5.2% rise. This divergence reflects global crude dynamics and refinery margin pressures. Diesel, Kenya's primary fuel for commercial transport and agricultural machinery, is acutely sensitive to international crude benchmarks and the Kenya shilling's weakness against the US dollar. The shilling depreciated 3.8% against the dollar in April alone, directly inflating import costs for refined products. Additionally, low regional supply from Tanzanian refineries and reduced output from Mombasa's KPLC facility have tightened diesel availability, pushing spot prices upward before EPRA's regulated ceiling catches up.

## What Do These Increases Mean for Kenya's Economy?

Transport operators will immediately pass these costs to consumers. Matatu fares in Nairobi and provincial routes are expected to rise 8-12% within two weeks, cascading into food price inflation at farm-gate and retail levels. Maize, tomatoes, and dairy—already volatile post-drought—will see renewed upward pressure as logistics costs climb. Manufacturing sectors dependent on diesel-powered generators (cement, steel, agro-processing) face compressed margins; those unable to raise prices risk inventory write-downs.

For investors, this creates a two-tier opportunity matrix. **Consumer staples stocks** (EABL, Safaricom, Equity Bank) may face near-term headwinds as discretionary spending contracts, but logistics and fuel retail plays (National Oil Corporation, Rubis Energy distribution partnerships) will benefit from volume turnover. **Infrastructure bonds** and dollar-denominated assets become more attractive as shilling weakness persists—a 7-10% depreciation against the dollar this quarter is plausible if crude stays above $85/barrel and the Central Bank holds rates at 10.5%.

The frozen kerosene price is politically strategic; kerosene serves 40% of Kenya's population in off-grid areas, and freezing it prevents a poverty-level shock despite broader inflation. However, EPRA's sustainability of this measure depends on crude trading below $83/barrel—breach that level, and kerosene will follow.

## When Will Prices Stabilize?

Stability hinges on three variables: crude prices (currently $87/barrel), shilling strength (CBK intervention), and regional refinery capacity. If crude retreats to $75-80 in June and the shilling strengthens to 161-165 against the dollar, July's price review could deliver a 2-5% relief. Conversely, geopolitical shocks (Middle East escalation) or shilling freefall would drive petrol past Sh170 and diesel past Sh200 by August—unsustainable levels that would trigger subsidy debates and policy intervention.

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