Although a small group of players dominates the sector-Total Kenya, Kenol Kobil, Shell Kenya and OiLibya control 75% of the market-there is no real evidence for cartels or other anti-competitive practices. Analysis of the data for the past 12 months shows that the rise in local fuel prices can largely be accounted for by the rise in global fuel prices and the depreciation of the Kenya shilling vis-à-vis the US dollar. In the year to September, for example, the average weighted petrol price in Nairobi was 18% higher than a year earlier (at KSh92.9/litre) but the shilling depreciated by 7% during the period while import prices (from the UAE, Kenya's main supplier) rose by 10%. The Nairobi fuel price rise in US-dollar terms (of 10%) in September was exactly the same as the increase in import costs, showing that the margins were unchanged. Local fuel prices have since climbed higher, to nearer KSh100/litre in early December, but this is explained by a new surge in global prices, which rose above US$90/barrel for the first time in over a year. Under the new regime, however, the Nairobi petrol price will be capped at KSh95/litre until the next review in January-but the formula is based on crude oil prices in October, which are already out of date. Marketers will be unable to respond to short-term crude oil price shifts, which is another serious flaw in the model.

The price caps follow other forms of government interference in the fuel sector, including the order in mid-2010 that the parastatal National Oil Company of Kenya (NOCK) be handed responsibility for importing 30% of the country's fuel needs. This is intended to improve security of supply and bring down prices, as NOCK is undercutting its rivals, but the parastatal does not face the same commercial pressures as private firms and is distorting the market. In addition, the government has disappointed Essar by not approving a long-sought increase in processing fees at the refinery, which may deter Essar from undertaking planned investment. Coming on top of the renationalisation of Kenya Power and Lighting (December 2010, Economic policy), this shows that the government is becoming more active in the energy sector. However, although there is no doubt that high fuel and power costs are bad for business, the government's bid for more control could backfire.

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