We empirically analyze convergence of European producer and consumer prices for diesel fuel and investigate the role of excise taxation. By comparing the speed of convergence of prices and taxes we find a surprisingly fast speed of convergence for consumer prices. While this can in part be explained by fuel tourism, the main driving force is producer price dynamics. Tax convergence contributes weakly to price convergence, but the overall effect is to slow down consumer relative to producer price convergence.
price convergence diesel international taxation European integration panel unit roots