Kenya Stands By Gulf Fuel Agreements Despite Rising Fuel Prices

The Kenyan government has defended its fuel supply agreements with Gulf-based suppliers after opposition parties renewed calls for the contracts to be scrapped amid rising fuel prices and concerns over transparency.

Speaking on May 29, Energy and Petroleum Minister Opiyo Wandayi said the agreements have helped stabilise fuel supplies and shield the country from volatility in global energy markets. According to Wandayi, the arrangement allows Kenya to secure freight and insurance costs in advance, reducing exposure to fluctuations in international oil markets and ongoing geopolitical tensions in the Middle East.

His remarks came days after Treasury and Economic Planning Cabinet Secretary John Mbadi dismissed calls to terminate the agreements, describing such proposals as irresponsible given the role the framework plays in supporting Kenya’s fuel supply chain.

Opposition Questions the Benefits

Critics argue that the government-to-government fuel import programme lacks transparency and has failed to deliver lower fuel prices for consumers. The criticism intensified following sharp fuel price increases in April. Data from Kenya’s Energy and Petroleum Regulatory Authority (EPRA) showed that petrol prices in Nairobi rose by 28.69 shillings per litre, while diesel prices increased by 40.30 shillings per litre.

Opposition leaders have questioned whether the agreements are providing the cost advantages originally promised when the programme was introduced.

The government-to-government fuel import framework was introduced in 2023 after the National Oil Corporation of Kenya began sourcing fuel from Saudi Arabia. The programme was later expanded through agreements with the UAE’s ADNOC and ENOC, covering supplies of petrol, diesel, kerosene and jet fuel. A key feature of the arrangement is a six-month deferred payment structure. Fuel is delivered to Kenya immediately, but payment is only made six months later. During that period, local fuel marketers sell the products domestically in Kenyan shillings. The proceeds are held in local banks before being converted into US dollars when payments to suppliers become due. The system was introduced to reduce pressure on Kenya’s foreign currency reserves and limit the need for large monthly dollar outflows linked to fuel imports. At the time, government officials argued that fuel purchases were placing significant strain on the Kenyan shilling.

Convinced of the programme’s benefits, the government extended the contracts in April 2025 for a further 24 months, ensuring the arrangement remains in place until 2027 and, for diesel supplies, through 2028. The extension also included revised pricing terms. According to Business Daily Africa, diesel freight charges and supplier premiums were reduced by 11%, lowering costs to $78 per metric ton.

Middle East Disruptions Test the System

The ongoing conflict in the Middle East is now placing the programme under pressure. Business Daily Africa reported that an ADNOC refinery supplying fuel to Kenya declared force majeure and temporarily suspended deliveries. The disruption affected shipments scheduled to leave the UAE through the Strait of Hormuz, one of the world’s most important oil transport routes.

A vessel expected to carry 85,000 tonnes of petrol was unable to depart from Jebel Ali in Dubai after shipping disruptions affected operations in the region. Two smaller vessels were eventually deployed, transporting a combined 76,000 tonnes and leaving a shortfall of approximately 9,000 tonnes.

The supply challenges have added to inflationary pressures in Kenya, where fuel costs continue to influence transport and consumer prices. Official data showed inflation accelerated in May for a second consecutive month, with higher fuel prices among the contributing factors.

Government Moves to Ease Pressure

Public frustration over fuel costs has continued to build. Truck drivers staged a strike in the week leading up to Wandayi’s comments and only resumed operations after receiving assurances that diesel prices would fall in June. In an effort to cushion consumers, the government released approximately 5 billion shillings (about $38.8 million) from the Petroleum Stabilization Fund.

Whether those measures will be enough to ease public concern remains uncertain as fuel costs continue to weigh on households and businesses. According to data from the Kenya National Bureau of Statistics (KNBS), Kenya spent 575.5 billion shillings on fuel imports in 2025, down from 628.8 billion shillings in 2024, but energy costs remain a significant burden on the economy.