Analysis on the relationship between petroleum products prices and inflation over the period 2015-2019

Abstract

This study was conducted in Uganda. The main objective was to find out if there is a relationship between petroleum products prices and inflation from 2015 to 2019. The study specifically looked at the relationship between oil prices and fuel prices, the trend in the different fuel products prices and the effect of each of the product prices on inflation. The study relied on secondary data from Uganda Bureau of Statistics (UBOS) data publications, Organization of the Petroleum Exporting Companies and Ministry of Energy and Mineral Development reports. The results obtained from the regression model indicated that petroleum prices had a statistically significant positive impact (p-value<0.05, ) on inflation rate in the long run at five percent level of significance, diesel prices had a statistically significant negative impact (p-value<0.05, ) on inflation rate in the long run at five percent level of significance while kerosene prices had a statistically significant negative impact (p-value<0.05, ) on inflation rate in the long run at five percent level of significance. The study concluded that fuel and oil prices affect the inflation in Uganda; the results indicated that petroleum prices had a positive impact on inflation rate in the long run while diesel and kerosene prices had a significant negative impact on inflation rate in the long run. The study recommended that the government of the Republic of Uganda should work on ensuring that the fuel prices remain stable in order to keep the exporting, importing and domestic goods transportation and production all functioning to achieve the desired macroeconomic targets.