Short-term and long-term effects of fuel carrier’s price rise on consumer price inflation in Iran

Abstract

Introduction: Oil is one of the primary commodities of all countries in the world and is, in essence, the energy base of all that we know as transportation. Therefore, derivatives price fluctuations, especially those of fuel and oil derivatives, are the main concerns of the policymakers because they can cause serious problems, such as inflation in commodity prices. Objective: The impact of the price of fuel carriers on food price index remains a subject of debate and research. the aim of this paper is to develop a model to define the inflation regime in iran and then to estimate gasoline and diesel price impact in the inflation anount. Method: In this study, using the central bank time series and available data on energy balance and World Bank data banks a non-linear distributed online delay regression modeling is developed to analyze the relationship between fuel price and basic commodity inflation. Results: the results show that gasoline prices have an impact. In the long run, it doesn't have much in the way of prices, but diesel can be somewhat effective in raising prices, which can exacerbate poverty in the community that needs special attention. Conclusion: It was also found that the price of diesel is harmful to the economy because it can stimulate inflation in the long term. However, in the short term, diesel does not cause any significant inflation in the prices. While the price of gasoline can have many short term social effects, therefore, the Iranian government must control the price of diesel fuel to prevent long-term food price inflation.