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Do classes of gas stations contribute differently to fuel prices? Evidence to foster effective competition in Spain

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  • Balaguer, Jacint
  • Ripollés, Jordi

Abstract

Despite the relatively large number of gas stations reached in Spain after decades of sectorial reforms, pre-tax fuel prices in the country remain systematically among the highest in the EU. The literature provides evidence suggesting that a low intensity of competition in the retail distribution could contribute to these casual observations. With the purpose of shedding light on ways to design effective competition measures, we conduct an empirical analysis of more than ten million observations containing information about prices, brands, and locations at the station level. This allows us to know whether the exit (entry) of some classes of stations have the ability to reduce the prices of nearby competitors. Our results suggest that the presence in a local market of a station belonging to the network of the dominant market companies will tend to generate prices above the average. This is not only because these stations set higher prices but also because their presence will give rise to overpricing by local competitors. The opposite occurs with the self-advertised as “low-cost” stations. Policy measures promoting the gradual exit of stations associated with the dominant companies seem quite reasonable in view of the commitment to the transition toward transport decarbonization.

Suggested Citation

  • Balaguer, Jacint & Ripollés, Jordi, 2020. "Do classes of gas stations contribute differently to fuel prices? Evidence to foster effective competition in Spain," Energy Policy, Elsevier, vol. 139(C).
  • Handle: RePEc:eee:enepol:v:139:y:2020:i:c:s0301421520300732
    DOI: 10.1016/j.enpol.2020.111315
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    Keywords

    Transportation fuel; Spain; Retail prices; Competition policy;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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