ethanol fuel production and use in kenya for sustainable ... - lumes
ethanol fuel production and use in kenya for sustainable ... - lumes
ethanol fuel production and use in kenya for sustainable ... - lumes
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UNIDIRECTIONAL FACTORS IN THE SYSTEM:An <strong>in</strong>crease <strong>in</strong> “WORLD OIL PRICES” leads to an <strong>in</strong>crease <strong>in</strong> “Transport costs”; <strong>and</strong> an <strong>in</strong>crease<strong>in</strong> “Transport cost”; leads to an <strong>in</strong>crease <strong>in</strong> “Price of goods, services <strong>and</strong> food” as <strong>production</strong>costs <strong>in</strong>crease from <strong>in</strong>creased transport costs of raw materials to factories <strong>and</strong> f<strong>in</strong>ishedproducts to the market. An <strong>in</strong>crease <strong>in</strong> “Price of goods, services <strong>and</strong> food” leads to an <strong>in</strong>crease<strong>in</strong> “POVERTY <strong>and</strong> HUNGER” beca<strong>use</strong> people loose the purchas<strong>in</strong>g power to meet basic needssuch as food <strong>and</strong> shelter.An <strong>in</strong>crease <strong>in</strong> “Political <strong>in</strong>stability <strong>and</strong> war <strong>in</strong> key oil produc<strong>in</strong>g countries” leads to adecrease <strong>in</strong> “Supply” through <strong>in</strong>terruptions <strong>in</strong> <strong>production</strong> especially <strong>in</strong> the volatile MiddleEast countries that are major producers of oil <strong>in</strong> the world.And an <strong>in</strong>crease <strong>in</strong> “Global dem<strong>and</strong> <strong>for</strong> oil” leads an <strong>in</strong>crease <strong>in</strong> “Consumption” the<strong>in</strong>creas<strong>in</strong>g dem<strong>and</strong> <strong>for</strong> oil puts a stress on the <strong>production</strong> quotas lead<strong>in</strong>g to <strong>in</strong>creased oil prices.2.1.1 ECONOMICAL IMPACTSThe economical impacts encountered from the dependence on petroleum <strong>fuel</strong>s <strong>in</strong>clude<strong>in</strong>flation <strong>and</strong> trade imbalance discussed <strong>in</strong> this section.InflationIncreased oil prices lead to a rise <strong>in</strong> the price of food <strong>and</strong> goods as the cost <strong>for</strong> produc<strong>in</strong>ggoods <strong>and</strong> services soar (Hirsch, 2005) illustrated <strong>in</strong> the CLD <strong>in</strong> figure 1. This change <strong>in</strong>prices is what is referred to as <strong>in</strong>flation which is def<strong>in</strong>ed as the percentage change of theConsumer Price Index (CPI) over a one year period <strong>and</strong> the CPI is def<strong>in</strong>ed as the measure ofthe weighted aggregate change <strong>in</strong> retail prices paid by consumers <strong>for</strong> a given basket of goods<strong>and</strong> services (M<strong>in</strong>istry of F<strong>in</strong>ance & plann<strong>in</strong>g, 2002). Historically, <strong>in</strong>flation <strong>in</strong> Kenya has beenma<strong>in</strong>ly ca<strong>use</strong>d by <strong>in</strong>creases <strong>in</strong> oil prices. This is beca<strong>use</strong> the commercial energy sector <strong>in</strong>Kenya is dom<strong>in</strong>ated by petroleum 22% <strong>and</strong> grid electricity 9% as the prime movers of themodern sector of the economy (M<strong>in</strong>istry of Energy, 2005). The relationship between <strong>in</strong>flation<strong>and</strong> high oil prices <strong>in</strong> Kenya can be observed <strong>in</strong> figure 2 from which it can be noted (apartfrom the period 1991,1993 dur<strong>in</strong>g which <strong>in</strong>flation was due to <strong>in</strong>ternal <strong>and</strong> external politicalfactors) that <strong>in</strong>flation <strong>in</strong> Kenya is to a significant extent <strong>in</strong>fluenced by oil prices.7