State pays oil marketers Sh6 billion amid fuel subsidy strain
National
By
Macharia Kamau
| May 25, 2026
The government has paid oil marketing companies Sh6 billion as partial settlement of the fuel subsidy arrears, but a larger amount estimated at more than Sh14 billion remains unpaid.
The government owed the petroleum sector players more than Sh20 billion, with the bulk of the money at Sh13.74 billion incurred in the last two pricing cycles.
The State had in the previous months been stabilising fuel prices but was slow to pay, resulting in the arrears growing to significant amounts.
An industry player told The Standard that the government had paid Sh6 billion by Friday, but also added that Sh14 billion remained unpaid.
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While the Sh6 billion payment offered temporary relief, the source noted that the much larger unpaid balance means oil marketers will still struggle to secure adequate working capital to sustain operations and finance imports.
“Many companies are already relying on expensive overdrafts and short-term loans because of delayed reimbursements. The bigger unpaid amount means the pressure on cash flows remains severe,” said the source.
President William Ruto on Friday said the State has in recent months spent heavily to cushion consumers from soaring global oil prices, both through direct subsidies and tax cuts on petroleum products.
He said the government has so far spent Sh13.74 billion from the Petroleum Development Levy (PDL) Fund in the April–May and May–June 2026 pricing cycles to keep pump prices lower than market rates.
The PDL Fund is a kitty funded by motorists, who pay a Petroleum Development Levy of Sh5.40 per litre of diesel and super petrol at the pump.
The kitty collects about Sh25 billion annually, which is, however, split between subsidising pump prices and petroleum development.
This means that the government has, in just two pricing cycles, spent more than half of the fund’s annual collections in an attempt to cushion consumers from surging global oil prices.
This, however, appears not to have been adequate as pump prices still went up significantly, resulting in the matatu strike that paralysed the economy last week.
The subsidy programme has also become a growing source of tension between the government and oil marketers, who have increasingly complained about delayed reimbursements.
Industry insiders say the delayed payments contributed to recent fuel shortages witnessed across the country, as some marketers quietly withheld petroleum products from the market in protest over mounting arrears and worsening cash-flow pressures.
Motorists across several towns in recent weeks grappled with intermittent shortages of diesel and petrol, a problem that has persisted since March, following the US-Israel attack on Iran on February 28, after which it became evident that oil importers like Kenya would experience major supply and price disruptions.
The Ministry of Energy in mid-May attributed one such major outage to technical and administrative hitches. However, industry players say delayed subsidy payments were also partly to blame.