IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v48y2012icp439-448.html
   My bibliography  Save this article

Taxes, cost and demand shifters as determinants in the regional gasoline price formation process: Evidence from Spain

Author

Listed:
  • Bello, Alejandro
  • Contín-Pilart, Ignacio

Abstract

This paper examines the pass-through of regional tax changes and spot price variations to regional gasoline prices in Spain. It also analyzes the impact of all major cost and demand shifters that contribute to regional gasoline price formation. To address these research issues, a reduced form price equation using monthly time-series cross-sectional (TSCS) data from January 2004 through December 2008 is estimated. Strong and consistent evidence of full shifting of regional tax changes to regional gasoline prices is found. Gasoline spot price changes are more than proportionally passed through to retail prices. In addition, the empirical evidence shows, on the one hand, that regional gasoline price differences before taxes continue to be quite narrow and, on the other hand, that there is still a margin for larger gasoline price differences among regions. This suggest that “traditional practices” from the monopoly era (i.e. relatively uniform regional gasoline prices) persist after the market has been liberalized, which may have been facilitated by the strong and uniform presence of the major Spanish-based refining companies in the retail sector over the whole country.

Suggested Citation

  • Bello, Alejandro & Contín-Pilart, Ignacio, 2012. "Taxes, cost and demand shifters as determinants in the regional gasoline price formation process: Evidence from Spain," Energy Policy, Elsevier, vol. 48(C), pages 439-448.
  • Handle: RePEc:eee:enepol:v:48:y:2012:i:c:p:439-448
    DOI: 10.1016/j.enpol.2012.05.069
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S030142151200482X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Justine S. Hastings, 2004. "Vertical Relationships and Competition in Retail Gasoline Markets: Empirical Evidence from Contract Changes in Southern California," American Economic Review, American Economic Association, vol. 94(1), pages 317-328, March.
    2. Besley, Timothy J. & Rosen, Harvey S., 1999. "Sales Taxes and Prices: An Empirical Analysis," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 157-178, June.
    3. Chen, Li-Hsueh & Finney, Miles & Lai, Kon S., 2005. "A threshold cointegration analysis of asymmetric price transmission from crude oil to gasoline prices," Economics Letters, Elsevier, vol. 89(2), pages 233-239, November.
    4. Rietveld, Piet & van Woudenberg, Stefan, 2005. "Why fuel prices differ," Energy Economics, Elsevier, vol. 27(1), pages 79-92, January.
    5. Bello, Alejandro & Cavero, Sandra, 2008. "The Spanish retail petroleum market: New patterns of competition since the liberalization of the industry," Energy Policy, Elsevier, vol. 36(2), pages 612-626, February.
    6. James Alm & Edward Sennoga & Mark Skidmore, 2009. "Perfect Competition, Urbanization, And Tax Incidence In The Retail Gasoline Market," Economic Inquiry, Western Economic Association International, vol. 47(1), pages 118-134, January.
    7. Duffy-Deno, Kevin T., 1996. "Retail price asymmetries in local gasoline markets," Energy Economics, Elsevier, vol. 18(1-2), pages 81-92, April.
    8. Christopher T. Taylor & Nicholas M. Kreisle & Paul R. Zimmerman, 2010. "Vertical Relationships and Competition in Retail Gasoline Markets: Empirical Evidence from Contract Changes in Southern California: Comment," American Economic Review, American Economic Association, vol. 100(3), pages 1269-1276, June.
    9. Dieter Pennerstorfer, 2009. "Spatial price competition in retail gasoline markets: evidence from Austria," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(1), pages 133-158, March.
    10. Severin Boreinstein & Andrea Shepard, 1996. "Dynamic Pricing in Retail Gasoline Markets," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 429-451, Autumn.
    11. Justine S. Hastings & Richard J. Gilbert, 2005. "Market Power, Vertical Integration And The Wholesale Price Of Gasoline," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 469-492, December.
    12. Carol A. Dahl, 1986. "Gasoline Demand Survey," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 67-82.
    13. Severin Borenstein & Andrea Shepard, 2002. "Sticky Prices, Inventories, and Market Power in Wholesale Gasoline Markets," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 116-139, Spring.
    14. L. Bettendorf & S. A. van der Geest & G. H. Kuper, 2009. "Do daily retail gasoline prices adjust asymmetrically?," Journal of Applied Statistics, Taylor & Francis Journals, vol. 36(4), pages 385-397.
    15. Meyler, Aidan, 2009. "The pass through of oil prices into euro area consumer liquid fuel prices in an environment of high and volatile oil prices," Energy Economics, Elsevier, vol. 31(6), pages 867-881, November.
    16. John Barron & Beck Taylor & John Umbeck, 2001. "New evidence on price discrimination and retail configuration," Applied Economics Letters, Taylor & Francis Journals, vol. 8(2), pages 135-139.
    17. Shepard, Andrea, 1991. "Price Discrimination and Retail Configuration," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 30-53, February.
    18. Patrick Rey & Joseph Stiglitz, 1995. "The Role of Exclusive Territories in Producers' Competition," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 431-451, Autumn.
    19. Germán Coloma, 2002. "The Effect of the Repsol-YPF Merger on the Argentine Gasoline Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(4), pages 399-418, December.
    20. Eduardo, Ley & Jessica, Boccardo, 2009. "The Taxation of Motor Fuel: International Comparison," MPRA Paper 19461, University Library of Munich, Germany.
    21. Slade, Margaret E, 1998. "Strategic Motives for Vertical Separation: Evidence from Retail Gasoline Markets," Journal of Law, Economics, and Organization, Oxford University Press, vol. 14(1), pages 84-113, April.
    22. Gerhard Clemenz & Klaus Gugler, 2006. "Locational choice and price competition: some empirical results for the austrian retail gasoline market," Empirical Economics, Springer, vol. 31(2), pages 291-312, June.
    23. Matthew Lewis, 2008. "Price Dispersion And Competition With Differentiated Sellers," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 654-678, September.
    24. Chouinard Hayley H & Perloff Jeffrey M, 2007. "Gasoline Price Differences: Taxes, Pollution Regulations, Mergers, Market Power, and Market Conditions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-28, January.
    25. Espey, Molly, 1996. "Watching the fuel gauge: An international model of automobile fuel economy," Energy Economics, Elsevier, vol. 18(1-2), pages 93-106, April.
    26. George Deltas, 2008. "Retail Gasoline Price Dynamics And Local Market Power," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 613-628, September.
    27. Dahl, Carol & Sterner, Thomas, 1991. "Analysing gasoline demand elasticities: a survey," Energy Economics, Elsevier, vol. 13(3), pages 203-210, July.
    28. Kaufmann, Robert K. & Laskowski, Cheryl, 2005. "Causes for an asymmetric relation between the price of crude oil and refined petroleum products," Energy Policy, Elsevier, vol. 33(12), pages 1587-1596, August.
    29. Contín-Pilart, Ignacio & Correljé, Aad F. & Blanca Palacios, M., 2009. "Competition, regulation, and pricing behaviour in the Spanish retail gasoline market," Energy Policy, Elsevier, vol. 37(1), pages 219-228, January.
    30. Suvankulov, Farrukh & Lau, Marco Chi Keung & Ogucu, Fatma, 2012. "Price regulation and relative price convergence: Evidence from the retail gasoline market in Canada," Energy Policy, Elsevier, vol. 40(C), pages 325-334.
    31. Barron, John M & Umbeck, John R, 1984. "The Effects of Different Contractual Arrangements: The Case of Retail Gasoline Markets," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 313-328, October.
    32. Sen, Anindya, 2003. "Higher prices at Canadian gas pumps: international crude oil prices or local market concentration? An empirical investigation," Energy Economics, Elsevier, vol. 25(3), pages 269-288, May.
    33. Contin, Ignacio & Correlje, Aad & Huerta, Emilio, 2001. "The Spanish distribution system for oil products: an obstacle to competition?," Energy Policy, Elsevier, vol. 29(2), pages 103-111, January.
    34. Bacon, Robert W., 1991. "Rockets and feathers: the asymmetric speed of adjustment of UK retail gasoline prices to cost changes," Energy Economics, Elsevier, vol. 13(3), pages 211-218, July.
    35. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    36. Severin Borenstein & A. Colin Cameron & Richard Gilbert, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 305-339.
    37. Andrea Shepard, 1993. "Contractual Form, Retail Price, and Asset Characteristics in Gasoline Retailing," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 58-77, Spring.
    38. Anindya Sen & Anthony Clemente & Linda Jonker, 2011. "Retail Gasoline Price Ceilings and Regulatory Capture: Evidence from Canada," American Law and Economics Review, Oxford University Press, vol. 13(2), pages 532-564.
    39. Severin Borenstein, 1991. "Selling Costs and Switching Costs: Explaining Retail Gasoline Margins," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 354-369, Autumn.
    40. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    41. Vita, Michael G, 2000. "Regulatory Restrictions on Vertical Integration and Control: The Competitive Impact of Gasoline Divorcement Policies," Journal of Regulatory Economics, Springer, vol. 18(3), pages 217-233, November.
    42. Ignacio Contin & Aad Correlje & Emilio Huerta, 1999. "The Spanish Gasoline Market: From Ceiling Regulation to Open Market Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-14.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fullerton, Thomas M. & Jiménez, Alan A. & Walke, Adam G., 2015. "An econometric analysis of retail gasoline prices in a border metropolitan economy," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 450-461.
    2. repec:eee:enepol:v:125:y:2019:i:c:p:207-215 is not listed on IDEAS
    3. Chin W. Yang & Hui Wen Cheng & Ching Wen Chi & Bwo-Nung Huang, 2016. "A Tax Can Increase Profit of a Monopolist or a Monopoly-like Firm: A Fiction or Distinct Possibility?," Hacienda Pública Española, IEF, vol. 216(1), pages 39-60, March.
    4. LeSage, James P. & Vance, Colin & Chih, Yao-Yu, 2017. "A Bayesian heterogeneous coefficients spatial autoregressive panel data model of retail fuel duopoly pricing," Regional Science and Urban Economics, Elsevier, vol. 62(C), pages 46-55.
    5. Thomas M. Fullerton & Alan Jimenez & Yu Liu & Adam G. Walke, 2015. "Gasoline price predictability in a border metropolitan economy," Applied Economics Letters, Taylor & Francis Journals, vol. 22(6), pages 499-502, April.
    6. Arunanondchai, Panit & Senia, Mark C. & Capps, Oral Jr, 2017. "Can U.S. EIA Retail Gasoline Price Forecasts Be Improved Upon?," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252717, Southern Agricultural Economics Association.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:48:y:2012:i:c:p:439-448. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/enpol .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.