Oil rents and domestic price dynamics: evidence from ten OPEC economies

Abstract

Oil-exporting economies face overlapping domestic price pressures, global energy shocks, and changes in resource income. This study examines relationships among consumer prices, oil rents, and the GDP deflator in ten OPEC economies from 1990-2021, accounting for country differences and shared influences. The findings show a positive association between consumer and domestic output prices: a 1% higher GDP deflator is associated with about a 0.73% higher consumer price level in the main estimates. This relationship varies substantially across countries, documenting heterogeneous inflation dynamics in oil-exporting economies. The GDP-deflator coefficient reaches 1.253 in the group classified as having higher subsidies, compared with 0.753 in the comparison group. However, this classification coincides with regional composition, and excluding Libya reduces the descriptive coefficient gap from approximately 0.500 to 0.266. The comparison therefore highlights country heterogeneity without establishing a causal subsidy effect. Overall, the results support interpreting domestic price developments through the joint behavior of consumer prices, economy-wide prices, and resource dependence. Policy implications favor coordinated monitoring of these indicators and country-specific assessments of subsidy reform, informed by observed retail-price changes, fiscal conditions, and household exposure