Pro-Inflationary Impact of the Oil Market—A Study for Poland

Abstract

The economic activity of businesses and the living standards of the population are largely dependent on inflation. Here, energy prices are of particular importance. Energy is what offers a competitive edge to economies. Therefore, many energy sectors still remain under state control. However, the fuel market is free although highly concentrated. The primary objective of this study was to determine the impact of fuel price changes on inflation in Poland. The research was based on causality models and regression models including asymmetry correction. The flow path was analyzed of price impulses from the basic raw material (i.e., crude oil) through wholesale diesel prices to inflation. The study demonstrates that with each successive stage of raw material processing, price volatility proves to be weaker. However, the final effect is still significant: inflation is largely shaped by energy carriers and, here, specifically by fuel prices. Such results have serious implications for the state’s economic policy. On one hand, they point to the limitations of this policy and, on the other hand, they raise questions about the legitimacy of the reforms that free up energy markets.