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.


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


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