8 U.S. dollar. About half of the countries passed through more than three-quarters of world price increases to consumers. It is worth noting that the world prices of LPG in July 2012 were markedly low: they were the lowest in two years except in the United States, where the prices in June 2012 were lower. The average FOB price of LPG in 2012 was more than double the price in July in North America and about 50 percent higher in the rest of the world. Despite the low world LPG prices, two-fifths of the countries had negative pass-through coefficients, and half had pass-through coefficients smaller than 75 percent. More detailed discussion on pass-through coefficients and the limitations of the methodology employed can be found in Kojima (2012).

Table 3: Summary statistics on pass-through coefficients between January 2009 and July 2012

|**Statistic**|**Gasoline**|**Diesel**|**Kerosene**|**LPG**|
|---|---|---|---|---|
|Average pass-through, %|73|75|63|96|
|Median pass-through, %|79|84|82|76|
|# of countries with pass-through less than 0%|7|11|8|10|
|# of countries with pass-through between 0 and 75%|24|17|12|15|
|# of countries with pass-through greater than 75%|34|37|24|25|
|# of countries with pass-through greater than 100%|26|26|12|21|
|Total number of countries|65|65|44|50|

_Sources_ : Author’s calculations based on sources cited in Tables A2.1 and A2.3 in Kojima (2012) and sources under “information” in Table A1.1.

# **2.2 Considerations for price control**

In countries with price controls, the first question is whether the government is setting price ceilings or price levels, and where along the supply chain they should be set (ex-refinery, landed cost, wholesale, ex-depot, retail). The prices or price ceilings can be the same throughout the country or vary by location (Table 4).

Table 4: Types of price control

|**Mechanism**|**Advantages**|**Potentialproblems**|
|---|---|---|
|Price ceilings|There is scope for price competition.<br>Divergence from ceilings suggests<br>emerging competition. There is less need<br>to get the prices “exactly right” than<br>controlling price levels.|If price ceilings are too high, there is little<br>incentive to improve efficiency. If they are too<br>low, fuel business may cease to be financially<br>viable.|
|Price levels|Greater control.|There is no scope for price competition. If price<br>levels are set too high, there is little incentive to<br>improve efficiency, and if set too low, fuel<br>business may cease to be financially viable.|
|Control at retail|Easy for consumers to check compliance.|More assumptions are needed to calculate prices<br>than controlling retail prices. Compliance is<br>more difficult to monitor because the number of<br>points to be checked is the largest at retail.|
|Control at<br>wholesale or<br>elsewhere upstream<br>of retail|More transparent because of greater<br>correlation with benchmark international<br>prices, easier to monitor compliance<br>because there are fewer points of sale.|If competition is inadequate, margins could grow<br>and retail prices could be markedly higher than<br>otherwise. If upstream prices are set too low, oil<br>companies may try to recover losses by<br>increasing retail prices to compensate.|
|Uniform prices|Sense of national unity: one country, one<br>price. Easy for consumers to check<br>compliance.|Freight equalization introduces additional scope<br>for inefficiency as well as corruption. The size of<br>cross-subsidization could become verylarge,to|