Assessing the Relationship between Fuel and Charcoal Prices in Uganda

Abstract

Charcoal is a dominant energy source in urban areas of Uganda, and increases in retail prices in the past have led to social unrest. This paper assesses the relationship between charcoal and fuel prices to determine whether fuel prices influence the retail price of charcoal. We specify a transportation cost model for charcoal supply and derive the reduced-form equilibrium price function. We estimate an error-correction model for the equilibrium price with monthly data from July 2010 to January 2021 to determine whether there are long-term and/or short-term relationships between the retail and supply prices of charcoal and the prices of diesel and other fuel types. As the price data are integrated of orders zero and one, the autoregressive distributed lag (ARDL) bounds test is used. The results show that there is a long-term relationship (cointegration) between the retail price of charcoal and the supply price of charcoal and the price of kerosene, which is a substitute energy source for the end users. The prices of firewood and diesel are not statistically significant in the model. The long-term equation includes a positive trend, indicating that the retail price of charcoal is increasing more over time than implied by the supply price of charcoal and the price of kerosene. The increasing demand from a growing urban population and the reduced supply from deforestation are trends that will increase the equilibrium price of charcoal, as observed.

Can ESG Stocks Be a Safe Haven during Global Crises? Evidence from the COVID-19 Pandemic and the Russia-Ukraine War with Time-Frequency Wavelet Analysis

“…The dimensions of ESG practices encompass a wide range of notions, including environmental factors such as renewable energy and waste management, social factors such as community participation and human resources management, and governance factors such as business ethics and risk management (Brzeszczy ński and McIntosh 2014). However, traditional energy sources, such as charcoal, still constitute a dominant energy source, for which any hovering in retail prices affects social cohesion and leads to social unrest (Alinaitwe and Bergland 2024).…”