Tom Insam


There's actually a little irony there. When taxes make up a small part the cost of fuel, a 50% change in the price of crude will push up pump prices by roughly that amount. However, for Europeans (who typically see a large, but consistent, part of the price of a litre going to their governments), the same rises and falls are hidden under the flattening effect of that fixed price.

As a counter-example, here's an interesting piece of research, also from the Economist:

We find strong and robust evidence that gasoline tax changes are associated with larger changes in gasoline consumption and vehicle choices than are commensurate changes in the tax-exclusive gasoline price.

I don't know if this would still apply if the point of the policy was to maintain a consistent price. But it's worth pointing out that the tax part of fuel prices is treated differently from the non-tax part.