Kenya faces a looming threat of increased fuel prices following renewed disruptions around the Strait of Hormuz, a key maritime chokepoint for global oil shipments. The ongoing tensions have tightened global oil supplies and driven a steep drop in international petroleum inventories.
According to recent market data, global oil stocks fell by 69 million barrels in July, accumulating a total reduction of 410 million barrels since the onset of the conflict earlier this year. This contraction raises concerns for Kenya, which imports all its petroleum products in refined form, making local fuel prices highly sensitive to international market fluctuations.
Impact on Supply and Refining
Despite a slight increase in global oil production to 101.5 million barrels per day in July, output remains significantly below last year’s levels, with 8.3 million barrels per day of Gulf production still offline. The closure of the Strait of Hormuz in early July and attacks on oil infrastructure have further constrained exports, which dropped by 2.1 million barrels per day in the region.
Refining capacity has also tightened, especially in the Atlantic Basin, where margins for diesel, jet fuel, and gasoline hit record highs. Global refinery throughput decreased by nearly 5 million barrels per day compared to the previous year, while diesel exports from major producing regions declined sharply.
Repercussions for Kenya
Kenya’s dependence on imported petroleum products, primarily delivered through the Port of Mombasa, makes it vulnerable to these supply shocks. Diesel, crucial for sectors such as transport, agriculture, manufacturing, and logistics, is particularly affected. Persistent fuel price hikes could ripple through the economy, increasing costs for transporting goods, raising commodity prices, and burdening households with higher transport fares.
At the end of July, North Sea Dated crude prices surged to $96.80 per barrel, translating to about Ksh12,507. Although prices have eased slightly since, they remain elevated, placing upward pressure on domestic pump prices.
Looking Ahead
With global oil inventories at their lowest levels since April 2025 and further supply disruptions possible, the market remains highly sensitive. Forecasts suggest a decline in global oil supply by 4.3 million barrels per day in 2026, alongside a contraction in demand due to rising prices and constrained availability.
For Kenya, the trajectory of fuel prices will hinge on international oil costs, currency exchange rates, and local pricing policies. However, if instability around the Strait of Hormuz continues, Kenyan consumers and businesses may face sustained fuel cost increases in the coming months.
