Fuel market regulations around the world
Market-determined retail fuel prices. This pricing type is typical for liberalized fuel markets. In countries with such markets the state intervention is limited to establishing terms and conditions that promote market transparency and free competition. Fuel retailers set their selling prices freely without major restrictions. Therefore, the fuel prices at different stations and in different regions of the country could vary.
Price ceiling. Under this form of price regulation, fuel retailers are also free to determine their selling prices as long as they do not exceed the specified ceiling. The government influences retail fuel prices by setting maximum prices for petroleum products, which are revised regulary. The purpose of this form of price control is to protect consumers from sudden upward price fluctuations or unreasonably high market prices.
Fixed price. The most extreme form of price control is when the government or another authorized institution fixes the retail fuel prices. All retailers must sell their fuels at exactly these prices.
The following table classifies 97 countries depending on which of the three main retail fuel pricing methods they apply. We used data from ministries, agencies and market analyzes to categorize the countries.
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We can draw the following conclusions:
• In 60% of the reviewed countries fuel markets are liberalized and the retail fuel prices are market-determined. The majority of the countries that fall within this category have a high level of economic development: Canada, USA, Japan, Australia, New Zealand and most European countries. But there are exceptions such as Afghanistan, Uganda, and Kyrgyzstan.
• In the remaining 40% of the countries the government is involved in the retail fuel pricing with a price ceiling or a fixed price.
• Fixed prices are the more common form of price control: 60% of the countries with regulated fuel markets apply this method. In the remaining 40% of the countries with regulated markets the governments set maximum retail prices.
• Within the group of countries with regulated markets fall both less developed countries such as Nepal, Zambia, and Tanzania as well as highly developed countries such as Belgium, Luxembourg, and Malta.
• You may notice that the OPEC countries and some other major crude oil producers choose to control strictly the retail fuel markets by introducing fixed subsidized retail fuel prices. Therefore in these countries retail fuel prices are among the lowest in the world (See our Gasoline prices ranking).