Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper examines the role of fuel excise taxes in mitigating the impact of global oil price fluctuations on domestic inflation. Using a panel dataset of 28 OECD countries from 2014 to 2021, the study explores how varying levels of fuel excise taxes affect the pass-through of oil price changes to retail fuel prices and overall CPI inflation. A range of econometric models confirms the robust relationship between fuel tax rates and oil price pass-through, indicating that higher fuel excise taxes are associated with a lower pass-through of oil price fluctuations to retail fuel prices and CPI inflation. Quantitatively, differences in fuel tax rates can account for approximately 30% of the variation in annual CPI inflation between countries such as the U.S. and the U.K. during the 2021 inflation surge. These results suggest that fuel excise taxes can serve as a buffer against volatile oil price shocks, offering a potential role for stabilizing domestic inflation in the face of global energy price volatility.