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Deregulation of wholesale petrol prices: what happened to capital city petrol prices?

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  • Alistair Davey

Abstract

Wholesale petrol prices were deregulated in August 1998. This paper will quantify the effect associated with the deregulation of wholesale petrol prices on relative retail prices for unleaded petrol in Adelaide, Melbourne and Sydney. This is done through Box-Jenkins autoregressive integrated moving average methodology coupled with Box and Tiao intervention analysis. Weekly price data will be used for Adelaide, Melbourne, and Sydney. It finds that from the beginning of 1999, deregulation coincided with relatively lower retail petrol prices for all three cities. In the absence of any other possible alternative explanation for the simultaneous fall in relative retail petrol prices across all three cities, it is concluded that this change was most likely associated with deregulation. These results suggest that regulation of wholesale petrol prices were ineffectual in terms of constraining capital city retail petrol prices at the very least and may have actually contributed towards relatively higher retail petrol prices. This also suggests that future policy interventions designed to constrain prices in the downstream petroleum industry should be very carefully considered. Copyright 2010 The Author. Journal compilation 2010 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd.

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  • Alistair Davey, 2010. "Deregulation of wholesale petrol prices: what happened to capital city petrol prices?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(1), pages 81-98, January.
    • Handle: RePEc:bla:ajarec:v:54:y:2010:i:1:p:81-98
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    File URL: http://hdl.handle.net/10.1111/j.1467-8489.2009.00480.x
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    References listed on IDEAS

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    1. Sarath Delpachitra & Diana Beal, 2002. "Petrol Prices Disparity: Did The Removal Of Price Surveillance Create Price Competition?," Economic Papers, The Economic Society of Australia, vol. 21(1), pages 56-65, March.
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    Cited by:

    1. Kai Li & Cheryl Long & Wei Wan, 2019. "Public Interest or Regulatory Capture: Theory and Evidence from China’s Airfare Deregulation," Working Papers 2019-01, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    2. Alistair Davey, 2013. "Estimating The Price Impact of the Victorian Terminal Gate Pricing Scheme," Australian Economic Papers, Wiley Blackwell, vol. 52(1), pages 19-37, March.
    3. Valadkhani, Abbas & Smyth, Russell, 2018. "Asymmetric responses in the timing, and magnitude, of changes in Australian monthly petrol prices to daily oil price changes," Energy Economics, Elsevier, vol. 69(C), pages 89-100.
    4. Prakash, Kushneel & Awaworyi Churchill, Sefa & Smyth, Russell, 2020. "Petrol prices and subjective wellbeing," Energy Economics, Elsevier, vol. 90(C).
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    6. Valadkhani, Abbas & Smyth, Russell & Vahid, Farshid, 2015. "Asymmetric pricing of diesel at its source," Energy Economics, Elsevier, vol. 52(PA), pages 183-194.
    7. Valadkhani, Abbas, 2013. "Modelling the terminal gate prices of unleaded petrol in Australia," Economic Modelling, Elsevier, vol. 33(C), pages 233-243.

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