Insurance = 0.15 percent of the FOB value and freight Ocean loss = 0.3 percent calculated on the sum of the FOB, freight, and insurance values Wharfage = the tariff set by the National Ports Authority of South Africa Coastal storage = cost of providing storage and handling facilities at coastal terminals Stock financing = cost based on the landed cost of refined petroleum products, 25 days of stockholding, and the ruling prime interest rate less 2 percent.

One important question is how much time lag to allow between when FOB prices were observed and when domestic selling prices were in effect. Even in very large, completely deregulated markets close to refining centers, the price transmission is not instantaneous because it takes time to move products and for the inventory to turn over. A detailed study of price transmission in 12 European countries found that it took 5 weeks on average for retail prices to capture about 90 percent of the price change (Myler 2009). In more distant markets, the time lag could be longer, especially if they are remote and small. Therefore, selecting the same time period for reference and actual prices could lead to serious over- or under-estimation of the price gap in times of rapidly changing world oil prices or foreign exchange rates. Given the above findings in Europe, it would make sense to allow for a time lag of at least a month for many developing countries.

If detailed shipping rates are available, declining costs with increasing scale can be captured, but such information is not always available. Delays in customs clearance or port congestion, as in Kenya and Nigeria (Kojima 2013), could increase demurrage charges significantly, but keeping track could be resource-intensive unless the delays and additional costs are fairly consistent over time. Inland transportation costs similarly depend on economies of scale as well as road conditions and, where they are used, the state of the rail network and oil pipelines. Obtaining cost information at this level would require dedicated studies.

LPG—about 60 percent of which is derived from natural gas and 40 percent from refining oil—is more difficult to store and transport than other liquid fuels, and as a result there is not a single global market for it. LPG is a gas at room temperature unless pressurized, and is stored in pressurized containers with attendant economies of scale (Kojima 2011). The costs of bottling and storage are unique to LPG and location-specific.

# **_Coal_**

Coal is the least internationally traded of the three fossil fuels. In 2013, only 17 percent of thermal coal consumed was traded (IEA 2014a). A substantial portion of the market, both within and between countries, operates under long-term contracts, and these prices are usually not published. Spot or shortterm prices may diverge considerably from long-term contract prices (OECD 2010a: 23), making establishment of reference prices difficult. As with petroleum products, it is important to adjust reference prices for coal quality, such as its caloric value and sulfur content. Of the three fossil fuels, coal is least likely to have inherent natural monopolies along the supply chain.

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