Correlation of oil prices and gasoline prices
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.
Bosnia & Herz.