Pass-through Effect of World Oil Price Shocks to the Domestic Pump Prices in Uganda

摘要

This study investigates the pass-through effect of oil price shocks to domestic pump prices using Structural Vector Autoregressive Model (SVAR). Using variance decomposition, accumulative impulse responses and SVAR coefficient, the study showed that there is insignificant pass-through effect of world oil price shocks to domestic pump prices in the period under the study. Further, the study demonstrates that performance in the domestic pump price for petrol/gasoline in the period under the study has never been determined by world oil price, neither has it been determined by real effective exchange rate nor has it been determined by household final consumption expenditure but rather it has been determined by other operating factors in the economy. Such factors may include the nature of domestic taxes and collusion in pricing by petroleum importers since the market is dominated by a few big importers/retailer. The policy implication in this study is that policymakers should structure the economy such that changes in world oil price shocks can easily be transmitted to the domestic pump prices.