How many bags of holding did you let your players aquire? As a bag of holding has a capacity of 500 lbs. So a bag could hold up to 25 powder kegs in (with nothing else in it). It takes one action to remove an item from a bag. Then fire has to be set to it (kegs don't come with fuses or other means to cause them to combust as that's generally contrary to its function, so the PCs are going to have to rig something up before hand or open the keg, set the entire keg on fire, or something). Then there's positioning (throwing, dropping, using telekineses*—Tenser's is pretty useless for most cases) the keg to blow up the PC's enemies and not themselves. That's a lot of actions (and resouces, if the PCs are using spells like telekineses*) to weaponize a powder keg that does 7d6 fire damage in a 10 ft. radius. Even with a ton of planning and preperation and best-case scenarios where the PCs can get multiple powder kegs to explode in one go, it's still not efficient and it assumes that damage from multiple exploding kegs stack in an additive manner (which they may not).
And for making gunpowder, do the PCs actually have the proficiency to make it, the ingredients, tools, and time to make it in significant quantities?
*If the PCs are wasting a 5th-level spell to manuever powder kegs they're probably shooting themselves in the foot.
laughs in Cyberpunk 2020
Why can't the enemy do the same thing (are they not creatures with at least average intelligence, capable of fine manipulation, have similar resources or trade or pilage those that do)? If they can't, don't the enemy at least have other, equally nasty, resources that it can bring to bear (magic, traps, special abilities, access to friendly, more powerful allies)? Doesn't the enemy have ways to counter, mitigate, or ignore gunpowder/explosives (like immunity or resistance to fire or nonmagical damage, ability to use fire on the party that's carrying gunpowder, etc)? In a game with magic and dragons (especially the fire-breathing sort) there should be more ways to deal with PCs with multiple powder kegs and a torch than in a game where the PCs have RPGs, C4, and assault rifles and you just have NPCs with RPGs, C4, and assault rifles.