An Examination of the Regulatory Regime for Oil Prices in the Down Stream Sector in Uganda

ABSTRACT Uganda ilberalized the downstream petroleum sector fri 1994. It was belleved that by opening up the sector and letting the L’idustry manage and sustain itself the benefits of a regulated industry with open market operations and competition would translate into low prices and benefits the people. Price determination Is far from being determined by market forces. This fittle success has been overshadowed by failure to realize a competitive market that would have resulted into low domestic oil products prices. This collusive pricing structure has resulted into increasingly hi~’h domestic retail prices. ThIs structure has been sustained by low price elasticity of market demanc4 hi~gh concentration and lack of an effective and appropriate legal and institutional regulatory framework. Howevei, Uganda still has opportunities to realize the full benefits of deregulation if the necessary infrastructure can be establlshed. Petroleum products are used across the entire economy in every country. Gasoline and diesel are the primary fuels used in road transpoit Oil Is used in power generation, accounting for 11 percent of total electricity generated i~’ Africa in 2007 Adequate and rellable supply of transport services and electricity in turn are essential for economic develophient. Households use a variety ofpetroleum products: kerosene for lighting, cooking, and heating; liquefied petroleum gas (LPG) for cooking and heating; and gasollne and diesel for private vehicles as well as captive power generation. In addition to the above higher oil prices increase the prices of all other goods that have oil as an intermediate input. The most siqnificant among them for the poor in low-income countries Is fooa~, on which the poor spend a disproportionately hiqh share of total household expenditure are food prices increase. This led into a protest of walk to work by A4C(Activist 4 Change) now known as 4CC (For God and my country) in Uganda in september 2010 and march 2011.