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Are “flexible” taxation mechanisms effective in stabilizing fuel prices? An evaluation considering wholesale fuel markets

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  • Di Giacomo, Marina
  • Piacenza, Massimiliano
  • Turati, Gilberto

Abstract

This paper analyses the incidence of specific taxes in fuel markets, and exploits the findings to simulate the effects of government interventions aimed at mitigating oil price fluctuations. Several reduced-form model specifications are estimated to study tax incidence, using wholesale equilibrium prices for both gasoline and motor diesel in the Italian fuel industry over the period 1996–2007 as dependent variables. We then assess the impact on fuel prices stemming from the creation of an automatic fiscal mechanism consisting of reductions in specific taxes matching the rise in oil prices. Our evidence supports the idea that “flexible” taxation mechanisms focused only on excise taxes could not be a viable policy for stabilizing the price level in fuel markets and more complex policies (based also on ad valorem taxes) are needed. Alternative interventions to control prices can be designed focusing on the market structure of these industries, where Antitrust Authority could play a significant role.

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  • Di Giacomo, Marina & Piacenza, Massimiliano & Turati, Gilberto, 2012. "Are “flexible” taxation mechanisms effective in stabilizing fuel prices? An evaluation considering wholesale fuel markets," Energy Economics, Elsevier, vol. 34(4), pages 1176-1186.
    • Handle: RePEc:eee:eneeco:v:34:y:2012:i:4:p:1176-1186
    DOI: 10.1016/j.eneco.2011.10.014
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    Cited by:

    1. Di Giacomo, Marina & Piacenza, Massimiliano & Scervini, Francesco & Turati, Gilberto, 2015. "Should we resurrect ‘TIPP flottante’ if oil price booms again? Specific taxes as fuel consumer price stabilizers," Energy Economics, Elsevier, vol. 51(C), pages 544-552.

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    More about this item

    Keywords

    Fuel markets; Excise taxes; Sterilization policy; Antitrust policy;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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