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The normal price. The case of the retail price of diesel fuel

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  • Kossov, Vladimir
  • Kossova, Elena

Abstract

For the large majority of goods, the price dispersion between countries does not exceed 1:10. Diesel fuel stands out, with a dispersion which exceeds 1:100. Given a constant oil price the difference in diesel fuel prices between countries is caused by the different taxes. The average share of taxes in the price determines the normal price. An estimation of the normal price of diesel fuel is made using an econometric model (using 79 countries, 1998-2008 by even years). Of greatest interest to economic policy are normal prices for countries with economies in transition and developing countries. This paper is organized as follows. In the introduction a definition of the term "normal price" and why it is important are presented. The first chapter is devoted to the notion of "price level" both international and national. The normal price is calculated using an econometric model. The estimation of the normal price of goods is determined by the international component and deviation of the normal price by the national one. In the second chapter the results of evaluating the parameters of the econometric model and the values of normal prices are given. In the third chapter price deviations in Russia and Kazakhstan are discussed and it is concluded that they have reached the maximum value, above which mass protests may result.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48667.

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Date of creation: 20 Mar 2013
Date of revision: 12 Oct 2013
Handle: RePEc:pra:mprapa:48667

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Related research

Keywords: budget revenue; diesel fuel price; motor fuel tax; mass protests; normal price; oil rent; price level;

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  1. Henrik Hammar, Asa Lofgren and Thomas Sterner, 2004. "Political Economy Obstacles to Fuel Taxation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-18.
  2. Kossov, Vladimir & Kossova, Elena, 2013. "Gasoline price as social phenomenon," MPRA Paper 48720, University Library of Munich, Germany.
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