For millions of Kenyans, the 14th of every month has become an important date.
It is the day when new maximum retail prices for petrol, diesel and kerosene are announced, and motorists, businesses, transport operators and households wait to see whether the price at the pump will go up or down.
But why does this happen every month?
Why can petrol become more expensive even when a motorist has not changed anything about their driving habits? Why can diesel prices move differently from petrol? And why can the price in Mombasa differ from the price in Nairobi, Nakuru or other parts of the country?
The answer lies in Kenya’s petroleum pricing formula.
The system is designed to translate the cost of importing petroleum products and moving them through the supply chain into regulated maximum wholesale and retail prices.
Understanding this formula makes it easier to understand why fuel prices in Kenya change every month.
What determines fuel prices in Kenya?
Kenya does not simply take the international price of crude oil and add a tax to determine the pump price.
The final price paid at a petrol station is influenced by several components across the petroleum supply chain.
These include:
- The landed cost of imported petroleum products
- Handling and storage costs
- Transportation costs
- Allowable losses
- Inventory financing costs
- Wholesale margins
- Retail margins
- Applicable taxes
- VAT
- Other approved costs within the regulatory framework
The Energy and Petroleum Regulatory Authority (EPRA) uses the regulated pricing formula to determine maximum wholesale and retail prices for regulated petroleum products.
In simple terms:
International and import costs → landed cost → storage and transportation → taxes and margins → maximum wholesale price → retail costs → maximum pump price
This is why the price displayed at a petrol station is the result of an entire supply chain rather than a single factor.
What is the petroleum pricing formula?
At the wholesale level, the regulated formula brings together the landed cost of the imported petroleum product and various costs associated with getting that product into the domestic supply chain.
The simplified structure is:
Maximum Wholesale Price = Landed Cost + Handling + Storage + Transport + Allowable Losses + Financing Costs + Wholesale Margin + Taxes + VAT + Other Approved Costs
At the retail level, additional costs are considered.
The simplified formula is:
Maximum Retail Price = Wholesale Price + Secondary Transport + Retail Margins + VAT
This means that the amount ultimately paid by a consumer reflects costs incurred from the point at which petroleum products enter the country through to the retail dispensing site.
The actual regulatory formula contains several specific components and definitions, but the simplified version helps explain the economics without requiring a technical pricing model.
1. Landed cost: one of the biggest drivers
The landed cost of petroleum products is a major component of Kenya’s fuel pricing system.
It represents the cost of bringing imported petroleum products into the country and is calculated using the applicable import and supply arrangements.
This means that changes in the international market can eventually affect the Kenyan pump price.
However, there is an important distinction.
Crude oil price is not the same as the price of petrol
Many people look at international crude oil prices and immediately expect petrol prices in Kenya to move by the same amount.
The relationship is more complicated.
Kenya imports refined petroleum products, meaning the relevant international market conditions for the products being imported matter alongside crude oil prices.
Factors such as global refined-product prices, freight, insurance, exchange rates and other import-related costs can influence the landed cost.
Therefore:
A fall in crude oil prices does not automatically mean an equivalent fall in the price of petrol in Kenya.
Likewise, an increase in international petroleum product costs can put upward pressure on local prices.
2. The exchange rate matters
Petroleum is traded internationally, and many import-related costs are denominated in US dollars.
Kenya, however, pays for fuel domestically in Kenya shillings.
This creates an important link between the Kenya shilling–US dollar exchange rate and fuel prices.
Suppose the international cost of a petroleum product remains relatively stable.
If the shilling weakens against the dollar, the Kenya-shilling equivalent of the imported product can increase.
That can contribute to a higher landed cost and, ultimately, upward pressure on the regulated pump price.
Conversely, a stronger shilling can reduce the Kenya-shilling cost of dollar-denominated imports, all else being equal.
This is one reason why looking only at international oil prices does not provide the complete picture.
3. Transportation and storage add to the cost
Petroleum products do not move directly from the port to a consumer’s vehicle.
They pass through a network of infrastructure that may include:
- Petroleum receiving facilities
- Storage terminals
- Pipelines
- Depots
- Road tankers
- Retail dispensing sites
The pricing framework therefore recognises various costs associated with moving and storing petroleum products.
These can include:
- Jetty handling
- Primary storage
- Primary transportation
- Secondary storage
- Secondary transportation
- Allowable product losses
- Other approved supply-chain costs
The further a product has to travel from the primary supply point to a retail market, the more relevant transportation and distribution costs become.
This also helps explain why maximum pump prices can differ between locations.
4. Why are fuel prices different in Nairobi and Mombasa?
If you have ever travelled across Kenya, you may have noticed that the price of petrol or diesel is not necessarily identical everywhere.
This is not simply a decision by individual petrol stations.
EPRA publishes maximum prices for different pricing towns and locations, reflecting differences in the cost of transporting petroleum products from the supply chain to different markets.
For example, locations closer to Mombasa generally have different transportation cost considerations from locations further inland.
The current EPRA price index illustrates this geographical structure, with different maximum prices published for towns including Mombasa, Nairobi, Nakuru, Eldoret and Kisumu.
This means the Kenyan fuel market is not one single pump-price market.
It is a national market with location-specific pricing considerations.
5. Taxes are another major component
Taxes and statutory charges form part of the regulated petroleum price.
This is important because even if the underlying cost of importing petroleum products falls, the final pump price may not fall by the same amount if other components remain unchanged.
The pricing formula therefore brings together:
Product cost + supply-chain costs + margins + applicable taxes + VAT
Any change to an applicable tax, levy or statutory charge can affect the final price.
For consumers, this means that comparing only the international price of crude oil with the local pump price can give an incomplete picture.
6. What role do petrol station margins play?
A petrol station is a business, and the regulated pricing framework recognises retail margins associated with operating a benchmark retail dispensing site.
These margins are intended to account for the investment and operating costs associated with fuel retailing.
A petrol station has expenses such as:
- Land and site costs
- Equipment and maintenance
- Electricity and utilities
- Staff
- Security
- Compliance
- Insurance
- Payment systems
- Environmental and safety requirements
- General operating expenses
The pricing formula therefore does not treat the pump price as simply the cost of buying fuel.
There is a regulated structure that accounts for the downstream retail function.
Why does EPRA change fuel prices every month?
The purpose of monthly pricing is to reflect changes in the costs used within the pricing framework rather than keeping the same maximum price indefinitely.
EPRA’s current framework provides for the retail and wholesale prices of regulated products to be published monthly on the 15th.
The pricing period generally runs:
15th of one month → 14th of the following month
This creates a regular review mechanism.
For example, EPRA’s September 2026 pricing cycle covers the period from 15 September to 14 October 2026.
This monthly system allows changes in relevant petroleum costs and approved pricing components to be reflected in the next pricing cycle.
Why don’t fuel prices change every day?
A natural question is:
If international petroleum markets change every day, why doesn’t Kenya change pump prices every day?
The answer is that Kenya operates a regulated monthly pricing mechanism for the specified petroleum products.
International petroleum markets can move continuously, but the regulated maximum retail price is reviewed and published according to the established monthly cycle.
This provides a predictable pricing period for consumers and businesses.
A motorist therefore does not normally need to worry about the pump price changing every time the international oil market moves during the day.
Why can petrol, diesel and kerosene have different prices?
Petrol, diesel and kerosene are different petroleum products with different market characteristics and supply-chain considerations.
Their import costs, demand patterns, pricing components and applicable taxes can differ.
Consequently, a change affecting one product does not necessarily produce the same movement in another.
This is why it is useful to look at the individual product price rather than assuming that all petroleum products must move together.
What happens when international oil prices rise?
Consider a simplified scenario.
Suppose international petroleum product prices increase significantly.
The higher import cost can increase the landed cost of the product.
If other components remain unchanged, this can put upward pressure on the maximum wholesale price.
The effect can then flow through to the maximum retail price.
The simplified chain looks like this:
Higher international product cost
↓
Higher landed cost
↓
Higher wholesale price
↓
Higher maximum retail price
However, the actual movement depends on the complete pricing formula and the other components applicable during that pricing cycle.
This is why it is not technically accurate to say:
“Oil went up by X%, so petrol must go up by exactly X%.”
The Kenyan pump price is determined through a multi-component formula.
What happens when international petroleum prices fall?
The same principle works in the opposite direction.
If relevant international petroleum costs decline, the landed cost may fall.
If other factors do not offset that reduction, the maximum wholesale and retail prices may also decline.
However, the reduction at the pump will not necessarily be identical to the percentage reduction in international petroleum prices.
Taxes, transportation costs, margins, exchange rates and other components remain part of the calculation.
Why businesses should pay attention to the pricing formula
Fuel pricing is not only a concern for motorists.
It affects almost every part of the economy.
Transport companies use diesel.
Agricultural businesses depend on fuel-powered machinery and transportation.
Manufacturers incur logistics and energy costs.
Construction companies depend on fuel for equipment and transportation.
Retail businesses depend on distribution networks.
Even consumers who do not own vehicles can feel the indirect effects of fuel-price movements through transportation and the cost of moving goods.
For petroleum businesses, understanding the pricing framework is even more important.
A petrol station operator, petroleum transporter, wholesaler or logistics company should understand how changes in petroleum prices can affect:
- Operating costs
- Cash flow
- Working capital
- Stock valuation
- Transport costs
- Customer demand
- Margins
- Business planning
Fuel prices are more than an international oil story
One of the biggest lessons from Kenya’s petroleum pricing system is that fuel prices are determined by a chain of costs.
The international market matters.
But so do:
Import costs → exchange rates → handling → storage → transportation → losses → financing → wholesale margins → taxes → retail costs → VAT
Looking at only one component can therefore produce a misleading picture.
For anyone involved in the petroleum industry, the better question is not simply:
“What is the price of crude oil?”
It is:
“What is happening across the entire petroleum supply chain?”
That is where the real explanation of Kenya’s fuel prices begins.
What should petroleum businesses watch every month?
For businesses operating in Kenya’s petroleum sector, the monthly EPRA price announcement should be treated as an important industry indicator.
Businesses should monitor:
1. The new maximum retail prices
Understand how the new prices compare with the previous pricing cycle.
2. International petroleum market conditions
Track developments that could affect the cost of imported petroleum products.
3. Exchange-rate movements
Changes in the Kenya shilling against the US dollar can influence import costs.
4. Taxes and statutory charges
Changes in taxation can materially affect the final pump price.
5. Supply-chain costs
Monitor developments affecting transportation, storage, logistics and petroleum infrastructure.
6. Demand
Changes in consumer and industrial demand can affect the wider petroleum market.
7. Regulatory developments
New regulations, guidelines, notices and policy changes can affect petroleum businesses beyond the pump price itself.
The bigger picture: what fuel prices tell us about Kenya’s energy sector
Monthly fuel prices provide more than a number on a petrol station price board.
They offer a window into Kenya’s wider energy economy.
They connect the country to international petroleum markets, foreign exchange movements, import logistics, storage infrastructure, transportation networks, taxation and regulation.
For this reason, understanding the petroleum pricing formula is important for anyone who wants to understand Kenya’s petroleum industry.
It also demonstrates why petroleum regulation is not limited to licences and compliance.
Petroleum regulation, market economics, infrastructure and energy security are closely interconnected.
Frequently Asked Questions
Why does Kenya change fuel prices every month?
Kenya operates a regulated monthly petroleum pricing mechanism. EPRA reviews the relevant pricing components and publishes maximum wholesale and retail prices for regulated petroleum products each month.
Who determines fuel prices in Kenya?
The Energy and Petroleum Regulatory Authority implements the regulated petroleum pricing framework and publishes the applicable maximum prices. The authority’s mandate to determine maximum wholesale and retail petroleum prices derives from the Petroleum Act.
What is the petroleum pricing formula in Kenya?
The formula combines the landed cost of petroleum products with approved supply-chain costs, transportation, storage, allowable losses, financing costs, margins, applicable taxes and VAT, together with other approved costs.
Why is petrol more expensive in some parts of Kenya?
Maximum prices can vary by location because transportation and distribution costs differ between pricing towns and markets.
Does the international crude oil price directly determine petrol prices in Kenya?
No. International petroleum market prices are an important factor, but the Kenyan pump price is determined through a broader regulated formula that includes import, logistics, taxes, margins and other components.
Does EPRA set the price that every petrol station must charge?
EPRA publishes maximum retail prices for regulated petroleum products. The published figure represents the maximum price applicable under the regulatory framework rather than necessarily meaning every station must charge exactly that amount.
Final Takeaway
The next time fuel prices change on the 15th of the month, remember that the number on the pump is the final result of a much larger system.
It reflects the cost of importing petroleum products, moving and storing them, financing inventory, operating the supply chain, applying taxes and accounting for regulated wholesale and retail margins.
Understanding this system makes it easier to interpret petroleum market developments — and to understand why fuel prices in Kenya can change even when the factors affecting motorists themselves have not changed.
At Gasic Ventures, we believe understanding the petroleum industry requires looking beyond individual licences and regulations to the wider market, infrastructure, economics and compliance environment.
Gasic Insights provides practical perspectives on Kenya’s petroleum and gas industry to help businesses, professionals and stakeholders better understand a sector that plays a central role in the country’s economy.
