This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.

This primer will help improve public understanding of the major factors that influence the U.S. price of gasoline & the challenges facing the U.S. on issues related to gasoline supply, demand, & prices. This primer presents information on the factors that influence the price of gasoline &, to the extent possible, why those factors have developed. Specifically, it explains how gasoline is made & distributed, what consumers pay for in a gallon of gasoline, why gasoline prices change over time, & why gasoline prices vary from place to place. The information is presented in a question-&-answer format & is written for a nontechnical audience. Charts, tables & graphs.