The 2025 Quarter One State of the Oil Industry Briefing was organised by the Petroleum Institute of East Africa and held on 25th March at the Sarova Stanley Hotel, Nairobi. The theme of the day was titled “The Oil and Gas Industry: A Key Sector in Enabling Export Earnings.” 

The Minister of Investments, Trade, and Industry, Cabinet Secretary Hon. Lee Kinyanjui, was the chief guest. Notably, the session was attended by Ms. Annastacia Kimtai, Managing Director of KCB Bank Kenya, who was the main sponsor. 

The Petroleum Institute of East Africa Chairman, Peter Murungi, highlighted that specific regulations are pending approval from the Attorney General (AG)   and final drafting.  Among those that the AG has cleared and are about to be gazetted include Statistics, Petroleum business licensing and Licensing of road transport. 

Some are under final drafting, such as those related to the Common User Facilities. There are plans to convert the private facilities to common user. The owners have been advised to apply for the conversion and have been assured that a common user tariff will be approved by the Energy and Petroleum Regulatory Authority (EPRA). Other regulations currently under final drafting include those on Lubricants, Quality Management, and Retail.  There are also regulations on Minimum operational stocks that are under preliminary review. 

Licensing the use of Autogas has been one of the strategies aimed at reducing the country’s carbon footprint. The government is encouraging the use of smart metres, and a legal framework is in development. These opportunities also enable the country to capitalise on carbon credits. The increased penetration of LPG in the country has led to more households switching to green energy. Hon. Kinyanjui noted that the government is looking at reclaiming forest cover in the long run, as people will rely more on LPG. 

Several concerns have been raised regarding the implementation of VAT offset, which hasn’t yet occurred. Due to the lack of implementation, the companies involved are incurring a larger tax burden and are suffering losses. 

The Cost of Fuel Pain Point

All these announcements and concerns raised are setting the stage for regulating the sector. However, the prevailing question is whether all these incoming regulations will address Kenyans’ largest pain point, which is the high cost of fuel. 

This conversation leads us to EPRA’s Energy and Statistics Report for the first half of the 2024/2025 financial year. The authority revealed that the calculation of fuel prices each month was dependent on several different cost components.

At the top of these components are landed costs, which entail expenses incurred when petroleum products arrive in the country through Kenyan ports. These costs include shipping and insurance. Another factor that the authority considers is the distribution costs incurred in transporting fuel from import terminals to various retail outlets. This is in addition to Government taxes and levies, demurrage costs incurred when tankers experience delays at the port, as well as the margins accrued by Oil Marketing Companies (OMCs). The authority considers all these in determining the final pricing of fuel products.

In Kenya, the shift in oil prices has a resultant domino effect on the prices of commodities. These changes are ordinarily attributed to the volatility of the global oil market as well as domestic tax adjustments that continue to exert upward pressure on fuel prices. Any price increase is always likely to ripple through the economy, affecting transportation, manufacturing, and household energy expenses. In the agricultural sector, for instance, an increase in oil prices would lead to higher costs associated with the production, processing, and transportation of food products. This means that this cost would be passed on to the consumer, consequently raising the prices of food items. 

The country’s taxation policies and inflation adjustments continue to fuel concern towards the increasing cost of living. In February 2025, Kenya’s annual inflation rate reached a five-month high of 3.5%, primarily driven by rising food and transportation costs, which impacted the cost of living for Kenyans. 

Kenyans will have to wait and see what effect the regulations before the Attorney General will have on the country’s economy.