Volatility of gasoline prices over time
The coefficient of variation is calculated as follows:
Coefficient of Variation = Standard deviation of prices / Average prices
The coefficient essentially shows how volatile gasoline prices are in various countries. In principle, excessive volatility is not good as it increases uncertainly and makes it more difficult to budget transport costs.
How to interpret the numbers. When the CV equals zero that means that gasoline prices did not change at all in the last one year. When the CV is, say, about 10 this means that gasoline prices fluctuated within about 10 percent up and down from the average levels in a country. Based on that, we can see on the chart that quite a few countries have relatively low price volatility. That is due to prices being set by the regulators and not by the market in many - primarily less developed - countries. The regulators often try to limit fuel price volatility as it creates uncertainty for households and businesses.
Another reasons for low price volatility - more relevant in advanced economies - is the high level of taxes on fuel and, more specifically, the high level of excise taxes. The excise tax is fixed amount per liter/gallon of fuel sold and does now change when oil prices change. When the tax is high, it represents a large fraction of the overall retail price of gasoline and reduces the price volatility. Notice, for example, that most European countries have a relatively low CV. That is due to the high fuel taxes. In contrast, gasoline prices in the U.S. are relatively more volatile as taxes are lower.
At one end of the chart we see several countries with a zero CV. In those countries, gasoline prices did not change for an entire year. These are countries with heavily regulated and often subsidized gasoline prices. Some of the countries in that area are major oil exporters.
At the other end are countries with significant volatility in gasoline prices. This often happens in countries that experience high inflation or rapid currency depreciation. The volatile price of gasoline is just one more manifestation of the overall economic and monetary instability. It is possible, however, that the high CV is due primarily to a very low level of prices in a country. When prices are low on average, even relatively small deviations from that low average would appear large.
Bosnia & Herz.