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How do Consumers Respond to Gasoline Price Cycles?

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  • David P. Byrne, Gordon W. Leslie, and Roger Ware

Abstract

This paper empirically studies how consumers respond to retail gasoline price cycles. Our analysis uses new station-level price data from local markets in Ontario, Canada, and a unique market-level measure of consumer responsiveness based on web traffic from gasoline price reporting websites. We first document how stations use coordinated pricing strategies that give rise to large daily changes in price levels and dispersion in cycling gasoline markets. We then show consumer responsiveness exhibits cycles that move with these price fluctuations. Through a series of tests we find that forward-looking stockpiling behavior by consumers plays a central role in generating these patterns.

Suggested Citation

  • David P. Byrne, Gordon W. Leslie, and Roger Ware, 2015. "How do Consumers Respond to Gasoline Price Cycles?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:journl:ej36-1-05
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    Cited by:

    1. Michael D. Noel, 2019. "Calendar synchronization of gasoline price increases," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(2), pages 355-370, April.
    2. David P. Byrne & Nicolas de Roos, 2017. "Consumer Search in Retail Gasoline Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 183-193, March.
    3. Justus Haucap & Ulrich Heimeshoff & Manuel Siekmann, 2017. "Fuel Prices and Station Heterogeneity on Retail Gasoline Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    4. Demet Yilmazkuday & Hakan Yilmazkuday, 2016. "Understanding gasoline price dispersion," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 57(1), pages 223-252, July.
    5. Aljoscha Janssen, 2022. "Price dynamics of Swedish pharmaceuticals," Quantitative Marketing and Economics (QME), Springer, vol. 20(4), pages 313-351, December.
    6. Mohammad Vesal & Amir Hossein Tavakoli & Mohammad H. Rahmati, 2022. "What do one hundred million transactions tell us about demand elasticity of gasoline?," Empirical Economics, Springer, vol. 62(6), pages 2693-2711, June.
    7. Haucap, Justus & Heimeshoff, Ulrich & Siekmann, Manuel, 2016. "Selling gasoline as a by-product: The impact of market structure on local prices," DICE Discussion Papers 240, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. David P Byrne & Jia Sheen Nah & Peng Xue, 2018. "Australia Has the World's Best Petrol Price Data: FuelWatch and FuelCheck," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(4), pages 564-577, December.
    9. Wein, Thomas, 2021. "Why abandoning the paradise? Stations incentives to reduce gasoline prices at first," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242362, Verein für Socialpolitik / German Economic Association.
    10. Thomas Wein, 2021. "Why Abandon the Paradise? Stations’ Incentives to Reduce Gasoline Prices at First," Journal of Industry, Competition and Trade, Springer, vol. 21(4), pages 465-504, December.
    11. Haucap, Justus & Heimeshoff, Ulrich & Siekmann, Manuel, 2015. "Price dispersion and station heterogeneity on German retail gasoline markets," DICE Discussion Papers 171, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    12. Jeisson Cárdenas & Jesús Otero & Luis H. Gutiérrez, 2022. "Search intensity, search time and prices: evidence from retail diesel markets in France," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(6), pages 4797-4807, December.
    13. Thomas Wein, 2020. "Why abandoning the paradise? Stations incentives to reduce gasoline prices at first," Working Paper Series in Economics 394, University of Lüneburg, Institute of Economics.
    14. David P. Byrne, 2019. "Gasoline Pricing in the Country and the City," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(2), pages 209-235, September.
    15. Noel, Michael D., 2015. "Do Edgeworth price cycles lead to higher or lower prices?," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 81-93.
    16. Noel, Michael D. & Qiang, Hongjie, 2019. "The role of information in retail gasoline price dispersion," Energy Economics, Elsevier, vol. 80(C), pages 173-187.

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