The Legal and Economic Regime of Oil Price Fluctuation in Uganda as Compared to Nigeria and Norway

ABSTRACT

A steep upward and downward trend in the price of crude oil in recent years, reaching a record nominal hígh in mid-2011, has led to increasing concern about its macroeconomic implications: both abroad and in Uganda given that the Ugandan economy is highly vulnerable to oil price fluctuations. This study analyses the dynamic legal and economic relationship between oil price fluctuations and major macroeconomic variables in Uganda. The study points out the asymmetric causes such as poor legal regimes and increased taxation of oil products. It also points out the effects of oil price fluctuations; for instance, positive as well as negative oil price fluctuations significantly increase friction and also directly increase real national income through higher export earnings in case Uganda starts to export its oil which has been discovered in the Albertine region, though part of this gain is seen to be offset by losses from lower demand for exports generally due to the economic recession suffered by trading partners who are not oil exporters. The available literature shows a strong positive relationship between positive oil price changes and real government expenditures. Unexpectedly, the result identifies a marginal impact of oil price fluctuations on industrial output growth. Furthermore, the ~‘Dutch Disease “syndrome is observed through significant real effective exchange rate appreciation. This research considers and extends the existing empirical literature of world oil price fluctuation, especially in Uganda, Nigeria and Norway depend on oil L’nported through Mombasa Por4, though efforts to begin domestic production are in high gear Like prices of other commodities in Uganda and the world over, the price of crude oil experiences wide price swings in times of shortage or oversupply. The crude oil price cycle may extend over several years responding to changes in demand as well as PEC and non-OPEC supply. The researcher in this study discussed the responsible factors of oil price fluctuations, the impact of geopolitical events, the comparison between Uganda, Nigeria, and Norway, as well as the recommendations for a stable oil price if any. 

TABLE OF CONTENTS

Cover page

Declaration ii

Approval iii

Dedication iv

Acknowledgements v

Table of contents vi

Abstract ix

Chapter Page

One ThE PROBLEM AND ITS SCOPE

Li Background of the study i

L2 Statement of the Problem 2

L3 Purpose of the Study 3

L4 Research Objectives 3

L5 Research Questions 3

L6 Hypothesis 3

L7 Scope 4

L8 Justification of the Study 4

1.9 Limitations of the study 5

1.10 Ethical considerations 5

1.11 Operational Definitions of Key Terms 6

Two LITERATURE REVIEW

2J. Meaning of oil price 7

2.2 Oil price fluctuation 7

2.2 Legal causes of oil price fluctuation 9

2.3 Economic causesof oil price fluctuation is

2.4 Legal and economic implications of oil price fluctuation 24

2.5 Researcher’s Opinion on the Uganda’s Petroleum Bill 2012 30

2.5 Comparison between Nigeria, Uganda and Norway 31

2.6 Researcher’s view 34

Three METHODOLOGY

3.1 Introduction 37

3.2 Research Design 37

3.2 Sampling Procedure 37

3.3 Sample Size 37

3.4 Validity and Reliability of the Instrument 38

3.5 Data collection methods 38

3.6 Desk research 38

3.7 Interview 38

3.8 Research procedure 39

3.9 Data Analysis 39

Four DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Over view 40

4.2 Demographic characteristics of Respondents 40

4.3 Cross tabulation legal causes of oil price fluctuation 40

4.4 Cross tabulation economic causes of oil price fluctuation 41

4.5 Effect of oil price fluctuation in Uganda 42

4.6 Recommended mechanisms of oil price fluctuation reduction 43

4.7 Conclusion 45

Five FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction 46

5.2 Findings 46

5.3 Recommendations 47

5,4 Conclusions 51

5.5 Areas for further research 52

References 53

Appendices

Appendix I - Transmittal letter for respondents 55

Appendix II — Clearance from Ethics Committee 56