Correlation of oil prices and gasoline prices

The chart on this page shows the correlation of retail gasoline prices with world oil prices. The idea is to see to what extent changes to oil prices carry over to changes in gasoline prices in various countries.

We use weekly data for 52 weeks ending with the latest data point from here. As new data are entered into our data base each week, we recalculate the numbers on the chart. The correlation is between the gasoline prices in a given week and the average of the oil prices in the last three weeks. The average is necessary as it takes about three weeks for changes to oil prices to filter through retail fuel prices even in the most open and liberalized markets.

We use Brent for the oil prices. Although WTI is more relevant for Canada and the U.S., Brent and WTI are highly correlated and using one or the other for computing correlations with fuel prices gives the same results.

A somewhat striking observation from the exercise is that there are quite a few countries with negative correlation. The circumstances in each of them are different but often in that group are countries with some economic and monetary instability. They may have high inflation and depreciating exchange rate which push up fuel prices. If that happens during a period of declining oil prices, then we observe a negative correlation.

At the other end are generally countries with liberalized fuel markets where the retail prices adjust rapidly to market conditions. We also see countries with regulated prices where the government responds rapidly to oil price changes by passing the oil price changes to retail prices.

In the mid-range of the chart are countries with a greater disconnect between oil prices and fuel prices. That is typically due to price regulation combined with a lower frequency of price level adjustment. Omitted from the chart are several countries where prices have not changed at all during the past year. We cannot compute the correlation for them as the variances of their gasoline prices is zero. A list of these countries can be seen here.


Israel
Zimbabwe
Mayotte
Burkina Faso
Egypt
Nicaragua
Ivory Coast
Cameroon
Lebanon
Grenada
Suriname
France
Colombia
Brazil
Zambia
Italy
Montenegro
Argentina
Mexico
Pakistan
Belize
Barbados
Mozambique
Kenya
Laos
Norway
Japan
Sierra Leone
Hong Kong
El Salvador
Benin
South Africa
India
Turkey
Mauritius
Cape Verde
Namibia
Russia
Poland
Curacao
Thailand
Burma
Tanzania
Jordan
Aruba
Slovenia
New Zealand
Ghana
Taiwan
Serbia
Canada
USA
Guatemala
Singapore
Belarus
Vietnam
UAE
Sri Lanka
Indonesia
Panama
Sweden
Saint Lucia
Australia
Lesotho
Germany
Costa Rica
Denmark
Fiji
South Korea
Cyprus
Luxembourg
Croatia
Netherlands
Kyrgyzstan
Portugal
Ukraine
Cayman Islands
Iceland
Dom. Republic
Nepal
Finland
Rwanda
Moldova
Slovakia
Uruguay
Chile
Jamaica
Philippines
Austria
Georgia
Honduras
Cambodia
Puerto Rico
Romania
Peru
Ireland
China
N. Macedonia
Lithuania
Bulgaria
Switzerland
Czech Republic
UK
Belgium
Estonia
Bosnia & Herz.
Greece
Hungary
Andorra
Latvia
Spain


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