The government subsidised diesel and kerosene prices by the biggest margin in eight months, keeping the overall prices unchanged for the monthly pricing cycle that lapses on January 14, 2026, helping avert inflationary pressure on the economy.
A subsidy of Sh5.67 per litre of diesel and Sh9.10 per litre of kerosene has helped to keep prices of the two fuels unchanged at Sh171.47 and Sh154.78, respectively, in Nairobi. Petrol prices did not fall despite a drop in the shipment costs of the product.
The last time consumers got a bigger subsidy per litre of diesel and kerosene was Sh6.09 and Sh6.18, respectively, in the monthly pricing cycle that lapsed on May 14, 2025.
Fuel prices are a key determinant of the cost of goods and services in the country, highlighting why a rise in pump prices could have triggered a rise in their costs and worsened the struggles facing households and businesses.
Shipment costs of diesel and kerosene jumped by up to five percent last month, prompting the higher subsidy to protect consumers and avert inflationary pressure.
Landed costs (price of product and cost of shipping) for diesel rose 3.02 percent to $654.24 (Sh84,926.89) per cubic metre of diesel last month, while that of kerosene jumped by 5.52 percent to (Sh86,589.76) in the same period for a similar quantity.
But the landed costs for petrol dipped 4.25 percent to $592.84 (Sh76,956.56) per cubic metre last month, setting the stage for a fall in retail prices of the fuel.
The government used petrol consumers to cross-subsidise diesel and kerosene, denying them the anticipated price relief of at least Sh2.78 per litre in the current cycle.
Cross-subsidisation allows the exchequer to share the burden with consumers of at least one of the three grades of fuel. Petrol consumers are paying Sh2.78 for every litre of petrol to cross-subsidise diesel and kerosene users in the current monthly cycle.
Unchanged prices of fuel are expected to significantly help avert a steep rise in inflation rate, a measure of the cost of living, handing relief to households during the Christmas and New Year festivities.
Inflation marginally dropped to 4.5 percent last month compared to 4.6 percent in October. It had been rising from 3.8 percent in May this year.
Farmers, transporters, power producers, and other sectors of the economy factor the prices of fuel into the pricing of their goods and services.
President William Ruto had vowed to scrap subsidies on fuel, saying it distorted the budget and triggered artificial shortages of the commodity.
But he made a U-turn and reinstated them and at bigger margins than the ones applied by the previous administration of retired President Uhuru Kenyatta.
