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

Kossov, Vladimir and Kossova, Elena (2013): The normal price. The case of the retail price of diesel fuel.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: budget revenue; diesel fuel price; motor fuel tax; mass protests; normal price; oil rent; price level
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D49 - Other; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy

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