The Political Economy of “Green” Regulation: Evidence from Fuel Price Markets

Abstract

The world price of oil is in constant flux, but countries respond to this reality in very different ways. Some heavily regulate the degree to which world prices “pass-through” to the price of gasoline at the pump, while others let domestic gasoline prices track world markets. We develop a novel, weekly dataset—to our knowledge the most comprehensive in existence—to explore the political economy of pass-through policies in over 100 countries. We find that autocracies are more likely than democracies to limit pass-through, especially those that are weakly institutionalized, ineffective providers of public services, and neo-patrimonial. Our project sheds light on the domestic policy choices that affect climate change and has significant implications for understanding price regulation more broadly.