To pass (or not to pass) through international fuel price changes to domestic fuel prices in developing countries: What are the drivers?

Energy Policy ◽  
2020 ◽  
pp. 111999
Author(s):  
Kangni Kpodar ◽  
Patrick Amir Imam
Keyword(s):  
Developing Countries ◽  
Fuel Price ◽  
Price Changes ◽  
Fuel Prices ◽  
Pass Through ◽  
Domestic Fuel

scholarly journals To Pass (or Not to Pass) Through International Fuel Price Changes to Domestic Fuel Prices in Developing Countries

2020 ◽  
Vol 20 (194) ◽  
Author(s):  
Kangni Kpodar ◽  
Patrick Imam
Keyword(s):  
Developing Countries ◽  
Short Term ◽  
Fuel Price ◽  
Price Changes ◽  
Fuel Prices ◽  
International Prices ◽  
Domestic Prices ◽  
Pass Through ◽  
Political Variables ◽  
Domestic Fuel

While many developing countries limit the international fuel price pass through to domestic fuel prices, others do not. Against this backdrop, we examine the factors that determine whether governments allow international fuel price changes to be passed through to domestic prices in developing countries using a dataset spanning 109 developing countries from 2000 to 2014. The paper finds that the pass-through is higher when changes in international prices are moderate and less volatile. In addition, the flexibility of the pricing mechanism allows for higher pass-through while exchange rate depreciation and lower retail fuel prices in neighboring countries inhibit it. The econometric results also underscore the fact that countries with inflation tend to experience lower pass-through, whereas those with high public debt exhibit larger pass-through. Finally, no evidence is found that political variables or environmental policies matter with regard to fuel price dynamics in the short-term. These findings, which are consistent across fuel products (gasoline, diesel and kerosene), allow us to draw important policy lessons for fuel subsidy reforms.

scholarly journals Domestic Fuel Price and Economic Sectors in Malaysia

2011 ◽  
Vol 3 (1) ◽  
pp. 28-41
Author(s):  
Hui-Siang JEE Brenda ◽  
Chin-Hong PUAH . ◽  
Shazali ABU MANSOR .
Keyword(s):  
Renewable Energy ◽  
Energy Prices ◽  
Economic Sectors ◽  
Fuel Price ◽  
Fuel Prices ◽  
High Dependency ◽  
Increasing Demand ◽  
Global Growth ◽  
Domestic Fuel

This study empirically examines the relation between the domestic fuel prices with the ten disaggregated economic sectors in Malaysia with the spanning of data from 1990:Q1 to 2007:Q4. We found that only three sectors (agriculture, trade and other services sectors) are cointegrated with the fuel price and fuel price does Granger cause these sectors. Despite the evidence of non-cointegrated in most of the economic sectors, fuel price able to influence these sectors over a longer period. Policy recommendation from this study includes the utilization of the renewable energy (RE) as a strategic plan is the long-term solution due to the high dependency and increasing demand of energy. While energy prices have experienced some correction in response to signs of slower global growth, sufficient government enforcement and support need to be established to facilitate successful renewable energy implementation in Malaysia.

scholarly journals Direct vs. Indirect Impact of Fuel Price on Wages in South Africa

2020 ◽  
Vol 24 ◽  
Author(s):  
Temitope Lydia Leshoro ◽  
Glenda Maluleke
Keyword(s):  
South Africa ◽  
Direct Effect ◽  
Inflation Rate ◽  
Impulse Response Function ◽  
Oil Prices ◽  
Fuel Price ◽  
Vector Autoregressive ◽  
Fuel Prices ◽  
Domestic Prices ◽  
Pass Through

The international oil price has been increasing significantly, but consumers react more to the announcement of the increase in fuel (pump) price, than an increase in international oil prices. This study, therefore, investigates the direct effect of fuel prices on the inflation rate and wages in South Africa, on the one hand, and the domestic price pass-through from fuel prices to wages (indirect effect) on the other. The impulse-response function of the vector autoregressive (VAR) technique was used to examine the direct and indirect effects of fuel prices on the inflation rate and wages, as well as the domestic prices pass-through from fuel prices to wages in South Africa. Quarterly data from 2001Q1 to 2018Q2 were utilised. The empirical results showed that inflation and wages responded positively to the shock in the fuel price. The results indicated that although wages increased because of a shock in the inflation rate—depicting the pass-through from the fuel price—the direct impact of the fuel price on wages is more significant. This study departs from the usual studies that examine the exchange rate pass-through of international oil prices to the inflation rate. The conclusion drawn was that the pass-through effect was not as strong and did not contribute as much as the direct effect of the fuel price. Therefore, the indirect shock of fuel prices, via inflation, does not so much cause an increase in wages as its direct shock. The study concludes with policy recommendations.

The influence of inflation targeting on the pass-through effect of the exchange rate

2018 ◽  
pp. 70-84
Author(s):  
Ph. S. Kartaev ◽  
Yu. I. Yakimova
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Policy Regime ◽  
Short And Long Term ◽  
The Exchange Rate ◽  
Pass Through ◽  
The Impact

The paper studies the impact of the transition to the inflation targeting regime on the magnitude of the pass-through effect of the exchange rate to prices. We analyze cross-country panel data on developed and developing countries. It is shown that the transition to this regime of monetary policy contributes to a significant reduction in both the short- and long-term pass-through effects. This decline is stronger in developing countries. We identify the main channels that ensure the influence of the monetary policy regime on the pass-through effect, and examine their performance. In addition, we analyze the data of time series for Russia. It was concluded that even there the transition to inflation targeting led to a decrease in the dependence of the level of inflation on fluctuations in the ruble exchange rate.

Fuel price increase, subsidies, overcapacity, and resource sustainability

2008 ◽  
Vol 65 (6) ◽  
pp. 832-840 ◽  
Author(s):  
Ussif Rashid Sumaila ◽  
Louise Teh ◽  
Reg Watson ◽  
Peter Tyedmers ◽  
Daniel Pauly
Keyword(s):  
Price Increase ◽  
Positive Aspect ◽  
Significant Component ◽  
Fuel Price ◽  
Fuel Prices ◽  
Resource Sustainability ◽  
Price Increases ◽  
Fishing Sector ◽  
Fuel Subsidies ◽  
Fuel Costs

Abstract Sumaila, U. R., Teh, L., Watson, R., Tyedmers, P., and Pauly, D. 2008. Fuel price increase, subsidies, overcapacity, and resource sustainability. – ICES Journal of Marine Science, 65: 832–840. Global fisheries are currently overcapitalized, resulting in overfishing in many of the world’s fisheries. Given that fuel constitutes a significant component of fishing costs, we expect recent increases in fuel prices to reduce overcapacity and overfishing. However, government fuel subsidies to the fishing sector reduce, if not completely negate, this positive aspect of increasing fuel costs. Here, we explore the theoretical basis for the expectation that the increasing fuel prices faced by fishing enterprises will reduce fishing pressure. Next, we estimate the amount of fuel subsidies to the fishing sector by governments globally to be in the range of US$4.2–8.5 billion per year. Hence, depending on how much of this subsidy existed before the recent fuel price increases, fishing enterprises, as a group, can absorb as much as this amount of increase in their fuel budget before any conservation benefits occur as a result of fuel price increases.

scholarly journals Modeling Airline Cost Pass-Through within Regional Aviation Markets

2018 ◽  
Vol 2672 (23) ◽  
pp. 146-157
Author(s):  
Bojun Wang ◽  
Aidan O’Sullivan ◽  
Lynnette Dray ◽  
Andreas W. Schäfer
Keyword(s):  
Empirical Evidence ◽  
Carbon Tax ◽  
Environmental Policies ◽  
Operating Costs ◽  
Fuel Price ◽  
Regional Markets ◽  
Pass Through ◽  
The Cost ◽  
The Impact ◽  
Fuel Costs

Studies assessing the impact of market-based environmental policies in aviation rely on various scenarios of airline cost pass-through, because there is little empirical evidence with respect to the impacts of airline costs on airfares. Instead, the costs effect has been indirectly measured by proxy variables such as distance, fuel price, and aircraft sizes. This paper provides empirical evidence of airline cost pass-through by developing an airfare model that explicitly captures airline operating costs. Using a feasible generalized two-stage least squares (FG2SLS) approach, we obtained coefficients of airline fuel costs per passenger, non-fuel costs per passenger, and non-fuel costs per flight modeling for seven world regions (20 region-pair markets). A comparison of the estimated cost pass-through elasticities conducted across regional markets suggests that airlines may respond to the cost increases differently, depending on the cost types and the markets they operate in. Based on the estimated coefficients, we systematically evaluate the potential impacts of introducing a carbon tax policy within two major regional markets with distinct cost pass-through elasticities.

Sign in / Sign up

Export Citation Format

Share Document