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Gasoline content regulation as a trade barrier: do boutique fuels discourage fuel imports?

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  • Adriana Z. Fernandez
  • Robert W. Gilmer
  • Jonathon L. Story
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    Abstract

    This paper examines the impact of Clean Air Act Amendments of 1990 (CAAA) environmental regulations on U.S. motor gasoline import patterns. Following the damage to U.S. petroleum refining infrastructure from hurricanes Katrina and Rita, the federal government provided temporary relief for several weeks from so-called boutique fuel specifications designed to improve air quality in certain regions of the country. These temporary waivers increased marketers’ ability to sell gasoline originally destined for specific regional markets into a greater number of markets. We hypothesize that these same waivers also encouraged gasoline imports more than increased prices would have alone. We test our hypothesis using two analyses. The first consists of a simple transfer function analysis designed to separate price effects (and thus effects of refinery closures) from the effects of regulatory relief. The second analysis consists of a natural experiment comparing the primary recipient of regulatory relief—the Gulf Coast gasoline market— to the rest of the United States. Both analyses suggest that the CAAA-related specifications prevent a substantial amount of gasoline imports from entering the United States under normal circumstances.

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    File URL: http://dallasfed.org/assets/documents/research/papers/2007/wp0709.pdf
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    Bibliographic Info

    Paper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 0709.

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    Date of creation: 2007
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    Handle: RePEc:fip:feddwp:0709

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    1. Brown, Jennifer & Hastings, Justine & Mansur, Erin T. & Villas-Boas, Sofia B, 2006. "Reformulating competition? Gasoline content regulation and wholesale gasoline prices," CUDARE Working Paper Series 1010R, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy, revised Jan 2007.
    2. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
    3. Ming-yuan Chen, 2005. "Technology adoption in response to changes in market conditions: Evidence from the US petroleum refining industry," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 14(8), pages 735-756.
    4. Chen, Ming-Yuan, 2002. "Survival duration of plants: Evidence from the US petroleum refining industry," International Journal of Industrial Organization, Elsevier, vol. 20(4), pages 517-555, April.
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