explaining differences in fuel prices among countries - United States ...

import more oil do not necessary have higher fuel prices, suggesting that the fiscal fragility effect and dependenceon fuel tax revenues is not statistically related to volume of oil-imports.ConclusionsThe analysis identifies two inherent political economic factors that affect fuel prices. This suggests thatthe heterogeneity of fuel prices among nations will continue, and that increases in crude oil prices will translate tohigher prices in some countries but not in others. This diversified outcome will result in a differentiated approach toenergy conservation and adoption of alternative fuels. This prediction stems from the notion that adoption occursonly when a critical indicator, in our case fuel prices, reach a threshold level above which adoption of alternativesare worthwhile.Indeed, countries that invested in research and development of alternatives to fossil fuels experienced large increasesin fuel prices during the last decade, while countries that had low and very stable fuel prices did not invest much inrenewable technologies and are not diversifying their primary energy sources.To conclude, our work suggests that with the increase in crude oil prices we will observe a transition away fromfossil fuels in some countries but not in others. The composition of primary energy will shift away from fossil fuelsin oil-importing countries, but will result in the oil-exporting countries consuming relatively more of these domesticfossil fuel resources. Although many countries have eliminated or at least reduced their fuel subsidies (IEA 2011:World Energy Outlook 2010), we hypothesize that cheap fuels will always be observed in some oil-rich countries, aswell as in autocratic countries.