Fuel shock looming as Ruto is caught between painful choices

A stark warning by former member of the President’s Council of Economic Advisors, Moses Kuria, has thrust the government into a familiar but far more dangerous corner. 

The dilemma facing the government is how to shield Kenyans from soaring fuel prices without undermining the fragile economic stability built over the past two years.

Kuria’s prediction that pump prices could hit between Sh230 and Sh250 per litre comes as tensions around the Strait of Hormuz threaten global oil supply. 

At the centre of this unfolding crisis is President William Ruto, facing what could become one of the most defining economic tests of his presidency.

Kuria has warned that April could be one of the most difficult economic periods in recent history, driven by the ripple effects of conflict involving Iran, Israel and the United States.

The Strait of Hormuz remains one of the most critical oil routes globally, handling roughly a fifth of the world’s supply. Any disruption in that corridor instantly pushes up global oil prices, tightening supply chains and triggering market anxiety.

For Kenya, the link is direct. The country imports most of its fuel, and prices are tied to international benchmarks. That means global shocks quickly translate into higher landing costs and, eventually, higher pump prices.

So far, William Ruto has leaned toward fiscal discipline rather than short-term relief.

Since taking office in 2022, his administration has moved away from fuel subsidies, tightened tax collection and aligned policy with International Monetary Fund-backed reforms. The strategy has been to stabilise the economy, even if it means short-term pain for consumers.

That position is now under pressure. A sharp rise in fuel prices would not just be an economic issue but a political one, with immediate effects on households already grappling with the cost of living.

In a statement issued on March 30, President Ruto confirmed that the ongoing conflict in the Middle East is already disrupting global supply chains and placing pressure on economies worldwide, including Kenya.

He revealed that the government has been closely monitoring the situation and had convened a high-level briefing bringing together key institutions, including the Ministries of Energy, Agriculture, Trade, the National Treasury, the Central Bank and private sector players.

The goal, he said, was to assess the unfolding crisis and agree on possible interventions.

According to him, the government-to-government fuel procurement arrangement has played a critical role in cushioning the country by ensuring a steady supply and moderating price increases.

The government’s options are limited, and each comes with trade-offs.

Reintroducing fuel subsidies could cushion consumers almost immediately, easing pressure on transport and basic goods. 

However, such a move would require billions in government spending, increase borrowing and risk derailing fiscal targets.

Cutting fuel taxes presents another path, potentially lowering pump prices without direct subsidies. But fuel taxes are a key source of revenue, and any reduction would widen the budget deficit at a time when the government is trying to consolidate its finances.

Specifically, the government in 2025  implemented a fuel levy securitization strategy, pledging a portion of the Road Maintenance Levy Fund (RMLF) to raise immediate cash for stalled road projects. Sh7 per litre of the existing Sh25 levy is directed to such projects. 

Holding the line and allowing market forces to dictate prices would preserve economic stability. The downside is that it places the full burden on citizens, raising the risk of public anger and political backlash.

Other options, such as tapping into strategic fuel reserves or diversifying supply sources, may offer some relief. However, these measures are unlikely to significantly offset a sustained global oil shock.

African countries, including Kenya, are also exploring possibilities of sourcing fuel from the Dangote Petroleum Refinery and Petrochemicals in Nigeria, but supply is unlikely to meet expected demand. 

Kenya’s economic position limits how far the government can go.

The country is managing high public debt while maintaining stability. Investor confidence, currency stability and inflation control all depend on maintaining fiscal discipline.

Any aggressive intervention, especially large-scale subsidies, could put pressure on the shilling, increase borrowing costs and reverse recent economic gains.

If fuel prices rise toward the projected levels, the effects will be immediate.

Transport costs are likely to increase, pushing up the cost of commuting and logistics. Food prices could follow as distribution becomes more expensive. Businesses would face higher operating costs, which could be passed on to consumers.

In effect, fuel becomes the trigger for a wider inflationary wave that touches nearly every sector of the economy.

For William Ruto, this is more than a policy decision. It is a test of leadership under pressure.

Choosing to protect consumers could strain public finances. Choosing to protect the economy could deepen public hardship.

As the global oil shock unfolds, the decision he makes in the coming weeks may shape not only the country’s economic trajectory but also his political future.