Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

Abstract: Two decades have passed now since the oil price shocks of the 1970s and since then

energy prices have - apart from short periods of price instability - evolved relatively

smoothly in the industrialized countries. Energy taxes in many countries differ

markedly thereby causing differences in final energy prices, but as similar tax levels

are becoming more common, e.g. in the European Union, convergence concerning

energy prices might be expected to appear. In the present paper national gasoline

price data covering the time period since the 1970s for a sample of OECD countries

are used in order to test for this often addressed topic of convergence. The empirical

part of the paper applies different time series based tests of convergence, where

gasoline prices exhibit convergence for most OECD-Europe countries in the case

where US$ is used for measurement of the energy prices indicating a convergence or

tax harmonization process is taking place for these countries.

Keywords: Gasoline prices; Price convergence; Gasoline tax harmonization

JEL-codes: Q40

27 pages, January 28, 2003

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