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)| false Coady, David, Moataz El-Said, Robert Gillingham, Kangni Kpodar, Paulo Medas, and David Newhouse, 2006, “ The Magnitude and Distribution of Fuel Subsidies: Evidence from Bolivia, Ghana, Jordan, Mali, and Sri Lanka,” IMF Working Paper 06/247 ( Washington: International Monetary Fund).
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)| false Gupta, Sanjeev, Benedict Clements, Kevin Fletcherand Gabriela Inchauste, 2003, “ Issues in Domestic Petroleum Pricing in Oil-Producing Countries,” in Fiscal Policy Formulation and Implementation in Oil-Producing Countries, editors ( Jeffrey M. Davis, Rolando Ossowski, and Annalisa Fedelino Washington: International Monetary Fund).
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Attachment 1: Key Data
Attachment II. Domestic Petroleum Pricing Practices, 2005- May 2006
The authors are grateful to James Daniel and John Thornton for their close guidance during the preparatory work underlying this paper, and Sanjeev Gupta and Mark Horton for helpful comments.
The countries included in the survey were: Afghanistan, Albania, Argentina, Armenia, Azerbaijan, Bangladesh, Bolivia, Bosnia and Herzegovina, Brazil, Cambodia, Cameroon, China, Colombia, Democratic Republic of the Congo, Republic of Congo, Dominica, Dominican Republic, Ecuador, Egypt, Ethiopia, Gabon, Georgia, Ghana, Honduras, Hungary, India, Indonesia, Jordan, Kenya, Kosovo, Kyrgyz Republic, Lao P.D.R., Lebanon, Malawi, Nigeria, Pakistan, Peru, Philippines, Russia, Senegal, Serbia, South Africa, Sri Lanka, Tanzania, Timor Leste, Turkey, Uganda, Ukraine, Uruguay, Yemen, and Zambia. The published source for the G7 economies is OECD/IEA Energy Prices and Taxes, various issues.
These pass-through calculations are subject to several important caveats. First, no allowance is made for transport, distribution and marketing costs, though these typically represent only a minor element (1–2 percent) of the total price. Second, it may be distorted by exchange rate changes; for example, an appreciation of a country’s exchange rate against the U.S. dollar, if not reflected in a corresponding fall in the domestic price of imports, could overstate the price pass-through. Finally, in practice, most oil is traded under contract arrangements for which prices are less volatile than spot world prices, and which suggests that our calculation of the pass-through is somewhat overstated with respect to contract arrangements.
The pass-through for the G7 countries was calculated using IEA data available for June 2006. Other data sources, however, indicate a somewhat higher pass-through in the United States. Data from the United States Energy Infirmation Agency suggest a pass-through ratio closer to one for this period. The pass-through coefficient also varies with the time period studied.
This section draws on the more detailed and comprehensive work by Gupta and others (2000). Tax issues are not discussed.
Pakistan and South Africa publish the price structure of petroleum products on government websites. In Lebanon, to keep retail prices fixed, excises are adjusted on a weekly basis. In Bangladesh, to keep retail prices at low levels, the tax base for petroleum products is set at about half of the market price for imported crude and refined petroleum products. In China, part of the impact of increases in international prices for crude oil is borne by refineries, though they offset these losses with profits on upstream and export activities, and the government has recently announced compensation.
In particular, kerosene is a close substitute for diesel. The World Bank (2006) estimates that half of the subsidized kerosene in India is used in the automotive sector. Switching from gasoline to diesel takes more time, but as the experience of South Asia indicates, subsidizing diesel relative to gasoline leads to heavy consumption of diesel by all forms of transport (which also worsens pollution).