The Effect of Petroleum Prices Fluctuation on Economic Growth in Tanzania: Evidence from 1990 to 2023

This study aims to analyze the effect of petroleum price fluctuations on economic growth (Gross Domestic Product) in Tanzania from 1990 to 2023. The research utilized data on petroleum prices and GDP, drawn from the World Bank and the Statistical Review of World Energy. The study used Autoregressive Distributed Lag (ARDL) model to analyze both short-term and long-term relationships between petroleum prices and GDP. According to the findings, petroleum prices have a significant but contrasting impact on GDP. In the short term, rising petroleum prices lead to an immediate decline in GDP growth, reflecting the economy's vulnerability to energy price shocks. However, in the long- run, rising in petroleum prices are positively correlated with GDP growth, fueled by increased demand for transportation and industrial operations. The study found no evidence of a long-run co-integration between GDP and petroleum prices, indicating that short-term fluctuations play a more immediate role in influencing economic performance. These results highlight the importance of balancing short-term energy price stabilization measures with long-term strategies focused on energy diversification and efficiency to ensure sustainable economic growth. The study emphasizes the crucial role of internal forces in driving changes in the economy, suggesting that both endogenous factors and external price shocks should be considered in policy-making.