How Changes in Global Oil Prices Will Affect Petrol Prices in 2019

Retail fuel prices across the world are mainly affected by prices in crude oil in the long-run. In the short-run, exchange rates, tax policy, regulations, supply disruptions, and seasonal factors also play a role but these influences are minor compared to crude oil.

Every 10 percent change in oil prices leads to about 3 percent change in fuel prices in Europe, and about 7 percent change in the U.S. In principle, the higher the fuel taxes, the smaller the change in fuel prices for a given change in oil prices. These numbers are the same for gasoline and diesel.

In a country with high fuel prices, an increase or decrease in oil prices from, say, 60 to 70 USD per barrel would lead to about a five percent increase or decrease in fuel prices.

For example, in Zimbabwe, which currently has the highest prices of petrol in the world, with prices averaging at 3.31 USD (approximately 336 shillings) means that an increase in global oil prices would lead to an increase of prices of petrol to about 3.48 USD (approximately 353 shillings).

If you are in a country with about average fuel prices, the change would be double – about 10 percent. Ivory Coast and Guinea are perfect examples of countries with average fuel prices of about 1.04 USD (approximately 105 shillings). If there was an increase in global oil prices, say, from 60 to 70 USD per barrel, the price of petrol in these countries would come to 2.08 USD (approximately 211 shillings)

If you are in a country with low fuel prices, that usually means that the government regulates or subsidizes prices. Then, oil prices have a less direct impact but eventually, policies adjust and fuel prices come in line with the crude oil prices.

Based on these observations and the latest oil price outlook, the chart below shows that the world average gasoline price is expected to increase slightly reaching 1.05 USD per liter in January 2020 from an average of 1.04 USD in 2019. This is a weighted average of the retail gasoline prices in 100 countries that represent over 90 percent of the world petroleum consumption.