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Competition, regulation, and pricing behavior in the Spanish retail gasoline market

  • Contín Pilart, Ignacio
  • Correljé, Aad F.
  • Palacios, María Blanca
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    The restructuring of the Spanish oil industry produced a highly concentrated oligopoly in the retail gasoline market. In June 1990 the Spanish government introduced a system of ceiling price regulation in order to ensure that "liberalization" was accompanied by adequate consumer protection. This paper examines the pricing behavior of the retail gasoline market using multivariate error correction models over the period January 1993 (abolishment of the state monopoly)-December 2004. The results suggest that gasoline retail prices respond symmetrically to increases and decreases in the spot price of gasoline. However, one the ceiling price regulation was abolished, the "collaboration" between the government and the major operators, Repsol-YPF and Cepsa-Elf in order to control the inflation rate results in a slower rate of increase (decrease) of gasoline retail prices when gasoline spot prices went up (went down) than elsewhere in the European Union. Finally, retail margins were by the end of our timing period of analysis, as in the first years after the abolishment of the state monopoly, well above the European ones.

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    File URL: http://hdl.handle.net/10810/5645
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    Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number 2006-02.

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    Date of creation: 2006
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    Handle: RePEc:ehu:biltok:200602
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    Order Information: Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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    1. 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.
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    8. Kirchgassner, Gebhard & Kubler, Knut, 1992. "Symmetric or asymmetric price adjustments in the oil market : An empirical analysis of the relations between international and domestic prices in the Federal Republic of Germany, 1972-1989," Energy Economics, Elsevier, vol. 14(3), pages 171-185, July.
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    11. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    12. 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.
    13. Lance J. Bachmeier & James M. Griffin, 2003. "New Evidence on Asymmetric Gasoline Price Responses," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 772-776, August.
    14. Galeotti, Marzio & Lanza, Alessandro & Manera, Matteo, 2003. "Rockets and feathers revisited: an international comparison on European gasoline markets," Energy Economics, Elsevier, vol. 25(2), pages 175-190, March.
    15. Reilly, Barry & Witt, Robert, 1998. "Petrol price asymmetries revisited," Energy Economics, Elsevier, vol. 20(3), pages 297-308, June.
    16. Bettendorf, Leon & van der Geest, Stephanie A. & Varkevisser, Marco, 2003. "Price asymmetry in the Dutch retail gasoline market," Energy Economics, Elsevier, vol. 25(6), pages 669-689, November.
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