World oil price impacts on country-specific fuel markets: Evidence of a muted global rebound effect

Abstract

Given the interconnectedness of global oil markets, significant changes in oil consumption in one country could have a spillover impact on international oil consumption. This concept, often referred to as the global rebound effect, estimates how changes in fuel consumption in an individual country influences world fuel prices and subsequent changes on world fuel consumption. Using monthly retail fuel price and consumption data, we build structural vector autoregressive (SVAR) models for 63 countries, which together represent nearly 70% of global refined oil consumption to examine the issue of the global rebound effect. We break out price and consumption elasticities by fuel type (i.e., gasoline versus diesel) and by fuel price policy groupings (i.e., liberalized/ad-hoc), as well as provide individual country and full sample price and consumption elasticities. We find muted impacts of changes in world crude oil prices on global oil consumption. These results suggest that in the short-run country-specific policies that influence oil consumption may not have significant global rebound effects.