Political Determinants of Fossil Fuel Pricing

51 Pages Posted: 20 Apr 2016

See all articles by Cees van Beers

Cees van Beers

Delft University of Technology - Economics of Innovation

Jon Strand

World Bank

Date Written: May 1, 2013

Abstract

This paper provides an empirical analysis of economic and political determinants of gasoline and diesel prices for about 200 countries over the period 1991-2010. A range of both political and economic variables are found to systematically influence fuel prices, and in ways that differ systematically with countries? per-capita income levels. For democracies, the analysis finds that fuel prices correlate positively with both duration of democracy and tenure of democratic leaders. In non-democratic societies there is more often no such relationship or it is the opposite of that for democracies. Regime switches -- transitions from non-democratic to democratic government, or vice versa -- reduce fuel prices. Fuel prices are also lower for more corrupt, or more centralized, governments. Higher levels of gross domestic product per capita lead to higher fuel prices, while export income from selling fossil fuels reduces these prices dramatically. Higher motor fuel consumption also appears to reduce fuel prices, most for gasoline. Absolute "pass-through" of crude oil price changes to fuel prices is found to be high on average.

Keywords: Energy Production and Transportation, Transport Economics Policy & Planning, Economic Theory & Research, Emerging Markets, Transport and Environment

Suggested Citation

van Beers, Cees and Strand, Jon, Political Determinants of Fossil Fuel Pricing (May 1, 2013). World Bank Policy Research Working Paper No. 6470. Available at SSRN: https://ssrn.com/abstract=2272941

Cees Van Beers (Contact Author)

Delft University of Technology - Economics of Innovation ( email )

Jaffalaan 5
2628 BX Delft
Netherlands

Jon Strand

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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