Kenya reinstates fuel subsidy after collecting Sh4 billion from motorists

Fuel Prices Held in Check

The Energy and Petroleum Regulatory Authority (EPRA) announced the new pump prices for the August 15 to September 14, 2025 cycle:

Ordinarily, Kenyans would have faced sharper increases given the rising global oil prices and a weak shilling. But EPRA’s pricing annex shows that diesel and kerosene benefited from negative stabilization margins. This means the state paid oil marketers to keep prices down.
According to EPRA’s official breakdown:

Diesel stabilization: –Sh2.04 per liter
Kerosene stabilization: –Sh2.86 per liter

This translates into hundreds of millions of shillings in payouts to oil marketers to bridge the gap between actual import costs and retail pump prices.
Meanwhile, Super Petrol received no subsidy this cycle; hence, the modest Sh1 price cut was driven purely by international cost movements.
The subsidies are funded by the Petroleum Development Levy (PDL), a tax of Sh5.40 per liter on petrol and diesel and Sh0.40 per liter on kerosene.
Over the past weeks, the State has collected about Sh4 billion from motorists through this levy, according to Business Daily. At least Sh400 million is being paid to marketers this month to cover diesel and kerosene stabilization.
This means the subsidy does not come from the exchequer but directly from money already collected at the pump.
The subsidy arrives at a politically sensitive time. Public discontent has increased due to the rising cost of living. The spike in oil prices has caused inflation in transportation, electricity, and food prices.
In its objective to protect diesel and kerosene users, the government must:

 
Protect households that rely on kerosene for cooking and lighting.
Shield public transport operators and farmers, who are heavy diesel consumers.
Ease inflationary pressures in the short term.

But for how long?
Energy analysts warn that this relief is temporary. If global oil prices and the shilling’s depreciation continue, the stabilization kitty may not be enough to keep pump prices down in the coming months.
The reinstatement also signals a policy shift. President William Ruto’s administration had previously scrapped fuel subsidies, arguing they were unsustainable. Yet growing public uproar has forced the government to revisit the stabilization fund.
For now, Kenyans can enjoy slightly lower pump prices in September. But the bigger question remains. Is the Petroleum Development Levy sustainable as a buffer? Will motorists continue to face higher levies in future cycles?