Kenyan motorists and businesses could soon breathe a sigh of relief as the Central Bank of Kenya (CBK) projects a drop in fuel prices for 2025.

This development comes as a welcome respite after years of fluctuating and often rising fuel costs, which have placed significant financial strain on households and industries alike. The decline in fuel prices is expected to be driven by increased global oil production, easing international oil prices, and strategic economic policies aimed at stabilizing the local energy market.

According to CBK Governor Kamau Thugge, global oil production is expected to rise significantly, mainly due to increased output from non-OPEC oil producers as well as adjustments in production quotas by OPEC+ member countries.

This surplus in supply will likely push global oil prices downward, a trend that is expected to trickle down to Kenya’s local fuel market. Brent Crude, the international oil benchmark, has already exhibited signs of decline, strengthening the argument for lower fuel prices in the coming months.

Local fuel costs

While lower global oil prices are a crucial factor in the anticipated drop in local fuel costs, the Energy and Petroleum Regulatory Authority (EPRA) plays a vital role in setting pump prices based on import costs, taxes, and levies. Recent pricing data from EPRA reflects the impact of past fluctuations.

Between December 2024 and January 2025, the authority announced minor increases in fuel prices, with Super Petrol rising from Sh176.29 per litre to Sh176.58, Diesel increasing from Sh165.06 to Sh167.06, and Kerosene climbing from Sh148.39 to Sh151.39 per litre. These price movements highlighted the volatility of the market, but with CBK’s projection, the trend is expected to reverse soon.

The projected decline in fuel prices could have far-reaching benefits for Kenyan consumers. One of the most immediate advantages will be lower transportation costs. With fuel being a primary expense for public service vehicles, ride-hailing services, and personal car owners, a reduction in prices will translate to more affordable commuting costs for millions of Kenyans.

Matatu owners and boda boda operators, who have been grappling with high fuel expenses, could experience relief, enabling them to maintain or even reduce fares for commuters.

Beyond transportation, industries and businesses that rely heavily on fuel for operations stand to gain significantly. The manufacturing sector, for instance, depends on fuel for machinery and logistics. Lower fuel prices could reduce production costs, leading to lower prices of goods and services in the market. This will be particularly beneficial for businesses that have had to adjust pricing due to high operational costs, helping to ease inflationary pressures on essential commodities.

Stabilize food prices

Another major area where lower fuel prices will bring relief is agriculture. Farmers who rely on fuel-powered machinery, irrigation systems, and transportation to markets will experience reduced input costs. This could help stabilize food prices, which have been impacted by high fuel costs in recent years. With lower costs of production, consumers can expect more affordable prices for fresh produce and other agricultural products.

The logistics and delivery sectors will also experience a boost. Companies that offer courier, e-commerce, and transportation services often adjust their charges based on fuel prices. With a decrease in fuel costs, businesses such as online shopping platforms and food delivery services could pass on the benefits to consumers by reducing delivery charges, making goods more accessible and affordable.

Even the aviation industry could benefit. Lower jet fuel prices mean reduced operational costs for airlines, potentially leading to lower airfares for both domestic and international flights. This would be a welcome development for travelers and could boost the tourism sector, as cheaper flights make Kenya a more attractive destination for both local and international visitors.

Despite the optimism, risks remain. Geopolitical tensions in key oil-producing regions, such as the Middle East, could disrupt global supply chains and hinder price reductions. Additionally, government-imposed import tariffs and local taxation policies could offset some of the benefits of lower global oil prices. As CBK Governor Kamau Thugge pointed out, these factors must be carefully managed to ensure that Kenyan consumers fully reap the benefits of falling fuel prices.

Global market shocks

Kenya’s heavy reliance on imported petroleum products means that the country is still vulnerable to global market shocks. Therefore, while lower fuel prices offer immediate relief, a long-term strategy focused on energy diversification could provide greater stability. Increased investment in renewable energy sources such as solar, wind, and geothermal could reduce dependence on petroleum products, shielding the economy from future oil price shocks.

Ultimately, if the projected decline in fuel prices materializes, Kenyan consumers could benefit from lower transportation costs, reduced prices for goods and services, and overall economic relief.