Authors : Arineitwe Killian; Dr. J. M. Okwadi Tukei; Lwawuga George William; Dr. Micah Lucy Abigaba; Dr. Anthony Olyanga Moni; Niyonshimye Sonia; Samuel S. Omwa

Volume/Issue : Volume 11 - 2026, Issue 2 - February

Google Scholar : https://tinyurl.com/7evzeda5

Scribd : https://tinyurl.com/4wjwa755

DOI : https://doi.org/10.38124/ijisrt/26feb464

Note : A published paper may take 4-5 working days from the publication date to appear in PlumX Metrics, Semantic Scholar, and ResearchGate.

Abstract : Diesel fuel is a critical production input in Uganda, supporting transportation, agriculture, construction, manufacturing, and power generation, yet its pump prices have exhibited persistent volatility with far-reaching macroeconomic effects. This study empirically examines the short-run and long-run determinants of diesel pump prices in Uganda using quarterly time-series data on employment (ETP), foreign direct investment (FDI), gross capital formation (GCF), and inflation (INF) within a Vector Error Correction Model (VECM) framework. Unit root tests indicate that all variables are integrated of order one, while Johansen cointegration tests confirm the existence of a stable long-run relationship. Empirical results show that employment growth (ETP) exerts the strongest influence on diesel pump prices, with a long-run elasticity of 21.71, implying that a 1% increase in employment is associated with approximately a 21.7% increase in diesel pump prices over time, reflecting demand-driven pressures arising from structural transformation. In the short run, employment exhibits a small but statistically significant negative elasticity (–0.0033), suggesting temporary supply-side adjustments that moderate price pressures. Foreign direct investment (FDI) has a price-reducing effect in both horizons, with long-run and short-run elasticities of –0.47 and –0.23, respectively, indicating that increased FDI lowers diesel pump prices through improvements in supply chains, storage, and distribution efficiency. Gross capital formation (GCF) reduces diesel pump prices in the short run, with an elasticity of –0.065, but is statistically insignificant in the long run, suggesting that initial efficiency gains are offset by induced demand over time. Inflation exhibits near-zero and statistically insignificant elasticities in both the short and long run, implying that diesel pump prices in Uganda are largely insulated from domestic inflationary pressures. The error-correction coefficient indicates that approximately 11% of short-run disequilibrium is corrected each quarter. These findings underscore that diesel pump prices in Uganda are primarily driven by real economic activity and structural factors rather than general price movements, offering important implications for fuel pricing policy and macroeconomic stabilization in oil-importing developing economies.

Keywords : Diesel Pump Prices, Employment, Foreign Direct Investment, Gross Capital Formation, Inflation, and Uganda.

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