Retail Gasoline Prices Research Articles

Oil price pass-through into consumer prices: Evidence from U.S. weekly data

Using U.S. data from Monday of each week, this paper estimates oil price pass-through into consumer prices (PC) and oil price pass-through into gasoline retail prices (PG) in a continuous way. The results show that PC (PG) is about 0.5% (13%) after a week, 1.5% (37%) after three months, and 4.2% (50%) in the long run. The estimated PC is further decomposed into direct PC (representing oil price effects on consumer prices through gasoline retail prices) versus indirect PC (representing oil price effects on consumer prices through ex-gasoline prices), suggesting that long-run oil price effects on consumer prices are mostly through ex-gasoline consumer prices. Despite having distinct pass-through estimates, about three-fourths of weekly volatility in both gasoline retail and consumer prices are explained by oil price shocks in the long run.

Convergence in retail gasoline prices: insights from Canadian cities

Convergence in retail gasoline prices: insights from Canadian cities

COVID-19 and Daily Oil Price Pass-Through

This paper investigates (crude) oil price pass-through into gasoline spot and gasoline retail prices in the U.S. due to the effects of coronavirus disease 2019 (COVID-19). The investigation uses daily data in a structural vector autoregression framework. Oil price pass-through is measured as the cumulative impulse response of gasoline spot or gasoline retail prices divided by the cumulative impulse response of oil prices. The results suggest evidence for complete pass-through of oil prices into gasoline spot prices, whereas the corresponding pass-through into gasoline retail prices is about 29% in the long run.

Gasoline price predictability: insights from consumer vehicle‐buying assessments

AbstractThis study employs the random walk forecasts of US retail gasoline prices for 2001–2020 in order to investigate the potential usefulness of consumer vehicle‐buying assessments for predicting gasoline prices. We show that the random walk forecasts are free of systematic bias and imply symmetric loss, but they do not fully contain the information on consumer vehicle‐buying assessments. For instance, the random walk forecast errors fail to be orthogonal to the difference of opinion of consumers about whether the next 12 months or so will be a good time or a bad time to buy a new vehicle, and to the difference of opinion of consumers about vehicle prices (but not interest rates). In addition, the random walk forecast errors fail to be orthogonal to the change in consumer opinion about gasoline prices, fuel efficiency and poor selections (quality). Such findings remain unchanged when we use the ‘weakly’ rational forecasts of gasoline prices instead of the random walk benchmark. Put together, our results provide new insights into the potential usefulness of consumer vehicle‐buying assessments for predicting gasoline prices. We recommend forecasters pay special attention to such assessments when forecasting retail gasoline prices, since they can potentially help produce forecasts that are superior to both the random walk and ‘weakly’ rational forecasts.

Evaluating the economic feasibility of cellulosic ethanol: A meta-analysis of techno-economic analysis studies

The conversion of cellulosic biomass to ethanol as a viable way of decarbonizing the transportation sector has experienced a growing interest in the last few decades. However, this infant industry still struggles to succeed commercially. To examine the economic feasibility of cellulosic ethanol, this study conducts a meta-analysis using recently published Techno-Economic Analysis (TEA) studies, which compute the Minimum Fuel Selling Price (MFSP) to measure the economic viability of ethanol production. This review finds that ethanol MFSPs range from $0.90–6.00/gallon with an average of $2.65/gallon, which is comparable to retail gasoline prices in the U.S. The considerable variation in MFSP estimates is due to the wide range of assumptions made by TEA studies. The unit cost of production was computed to examine the economies of scale effect, which resulted in a scale factor of 0.69. This estimate affirms the assumptions made by TEA studies. Multivariate linear regression shows that capital cost is positively correlated, while input capacity and output capacity are negatively correlated, with MFSP. These variables significantly impact MFSP, while pathway, feedstock type, and feedstock cost are not statistically significant due partly to data limitations. Findings from this analysis provide insights for improving the economic viability of cellulosic ethanol, which calls for a suite of government policies including financial incentives, mandates, and assistance programs for this industry to thrive.

Are petrol retailers less responsive to changes in wholesale or crude oil prices when they face lower competition? The case of Greater Sydney

Market efficiency is distorted when retailers are unwilling to pass on changes in wholesale costs or the price of oil (as a major production input cost) to motorists. Existing approaches to measuring pass-through parameters may obscure such behaviour because of the use of fixed-parameter models and/or aggregated price data across different locations and brands over time. We contribute to the literature by examining if there is a mismatch between wholesale and retail petrol prices across different brands supplying unleaded petrol within the same geographical location. To do so, we examine the effects of upstream shocks, arising from changes in oil or wholesale petrol prices, on the retail petrol prices of 672 stations in Sydney, Australia's largest city. We find that the pass-through parameters are significantly lower for stations with fewer competitors in their immediate proximity. When there are fewer than 13 petrol stations within a 5-km radius, or 33 stations within 10 km, irrespective of their brand, they become increasingly less responsive to changes in the wholesale petrol price or the price of crude oil. Our findings enhance market transparency and provide regulators with a rule of thumb that allows them to monitor the unleaded petrol market more effectively.

Gasoline prices and their relationship to the number of fatal crashes on U.S. roads

Economic factors are assumed to have substantial effects on transportation crash trends. This study makes a comprehensive examination of the relationship between the retail gasoline price, and fatal traffic crashes from 2007 to 2016 in the U.S. Random effect negative binomial (RENB) regression models are used to investigate the relationship while controlling for the other effective factors. This is achieved by developing appropriate crash prediction models. Based on the role of gender and rider's transportation mode in interpreting the prediction results, seven models are developed to investigate the relationship between the inflation adjusted gasoline price and the number of fatal crashes in male, female, motorcyclist, non-motorcyclist, bicyclist, pedestrian, and total groups. Our findings suggest that increasing gasoline prices will not significantly alter the number of total fatal crashes. On the other hand, it is estimated that a one-dollar increase in adjusted gasoline price is associated with a 24.4% increase in the number of fatal motorcycle crashes (p-value = 3.7e-14), a 1.9% decrease in the number of fatal non-motorcycle crashes (p-value = 0.02), and a 8% decrease in the number of fatal pedestrian crashes (p-value = 0.08). There is no noticeable difference between males and females in response to the gasoline price changes.

РОЗНИЧНЫЕ ЦЕНЫ НА БЕНЗИН В МОСКВЕ В ПЕРИОД ПАНДЕМИИ COVID-19

The article is devoted to the analysis of retail gasoline prices in Moscow in the period after the start of the spread of coronavirus infection. We analyze the statistical data on changes in wholesale and retail prices for the main brands of gasoline and diesel fuel during the pandemic. Empirical data reveal the effect of the damper price regulation mechanism, which makes it possible to soften the reaction to sharp fluctuations in world oil prices. It is shown that positive and negative price shocks in the world oil market during the pandemic smoothed out at the level of wholesale prices for oil products in Russia, and practically neutralized at the level of retail prices.

The Relationship between Refined Retail Oil Prices and Crude Oil Prices: A Tale of Three Cities in the Greater Bay Area of China

This article investigates the long- and short-term relationships between refined retail oil prices and the international crude oil price in Shenzhen, Hong Kong, and Macao. Using an asymmetric error correction model (AECM), we find that, first, there is a long-term relationship between retail petrol and diesel prices and the crude oil prices for all three cities. Second, the results of the asymmetric adjustments show that the retail diesel prices in Hong Kong and both petrol and diesel prices in Macao are adjusted upward faster than downward. The results imply that these markets in Hong Kong and Macao are not competitive. However, there is no evidence of asymmetric price adjustment for Shenzhen.

Hurricanes and Gasoline Price Gouging

Conventional wisdom suggests that gasoline price gouging before and after natural disasters is widespread. To explore this conjecture, we compile data on more than 4.7 million daily station-level retail gasoline prices. We combine these data with information on wholesale rack prices, spot prices, hurricane threats and landfalls, weather, traffic, and power outages. We investigate the effect of hurricanes on retail prices, wholesale prices, retailer margins, fuel price pass-through, and share of stations reporting transactions. We exploit the fact that the exact timing and location of hurricane landfalls is conditionally exogenous for identification. We find no evidence for widespread price gouging. Instead, we document evidence consistent with shortages predicted by theory in the presence of restrictions on price movements.

Estimating retail gasoline price dynamics: The effects of sample characteristics and research design

The study shows that much of the variation in the findings of the literature on retail gasoline price dynamics is systematic rather than sample variation from using different data. Estimates of pass-through rates depend systematically on research design and features of the data, such as the sampling frequency, the choice of upstream price, whether taxes are included or not, the sample length, and the postulated lag structure. In addition, there are systematic differences between time periods and countries. Using a 20 year-long dataset of 28 European Union countries we quantify the extent of estimate variation that arises from the choice of data structure from that arising from temporal and country heterogeneity and sampling variation. We also show that country heterogeneity itself has systematic components, with wealthier countries experiencing slower adjustments. Our results inform the interpretation of results on pass-through rates derived from Error Correction Models. They are also of relevance for the broader literature estimating the transmission of price shocks in the economy.

A deployment model of EV charging piles and its impact on EV promotion

The construction of public-access electric vehicle charging piles is an important way for governments to promote electric vehicle adoption. The endogenous relationships among EVs, EV charging piles, and public attention are investigated via a panel vector autoregression model in this study to discover the current development rules and policy implications from the historical panel data in China. Five policies related to EV charging piles, EV purchase subsidies, commercial land prices, and retail gasoline prices are controlled as exogenous variables in the model. The results indicate that EV and charging piles diffusion do interact, and public attention plays a nexus role in EV and charging piles deployment. Reducing the electricity rate is the most effective policy approach to promote EV charging piles. Subsidising the construction cost has an insignificant impact on charging piles diffusion in this study, and several possible reasons have been discussed. The promotion effect of direct-current charging piles on EV sales is twice that of alternating-current charging piles in the one-year simulation of our model. Increasing the number of EV charging piles has a significant impact on battery electric vehicle sales but not on plug-in hybrid electric vehicle sales.

What Matters for Consumer Sentiment? World Oil Price or Retail Gasoline Price?

This paper examines the impact of oil supply and demand shocks on gasoline prices and consumer sentiment in the Euro Area. Results reveal that aggregate consumer sentiment and its components deteriorate notably as a response to positive shocks to real gasoline prices. On the contrary, positive oil-specific demand shocks do not trigger a deterioration of consumer sentiment. In other words, consumer sentiment is affected primarily by unexpected changes in gasoline prices at the pump rather than unexpected changes in crude oil prices. The analysis is further refined to analyze the effects of these shocks to six sub-components of consumer sentiment.

Gasoline Price and Competition: New Evidence from Traffic Pattern

Competition is considered as an important factor that influences gasoline prices. In spatial competition, an increased density of competitors has a direct impact on lowering gasoline price. However, prior research omitted an important demand factor: traffic volume. This paper uses a reduced-form approach to test for the relationship between market density and retail gasoline price with and without traffic volume. The omission of traffic volume biases the estimated effect of market density on retail gasoline price and leads to a 61% overstatement. Furthermore, this paper examines the relationship between market density and price dispersion with and without traffic dispersion.

Daily Oil Price Pass-Through into the U.S. Gasoline Prices Amid the COVID-19 Crisis

This paper investigates the (crude) oil price pass-through into gasoline spot and gasoline retail prices in the U.S. due to the effects of coronavirus disease 2019 (COVID-19). The investigation is achieved by using daily data in a structural vector autoregression framework. The oil price pass-through is measured as the cumulative impulse response of gasoline spot or gasoline retail prices divided by the cumulative impulse response of oil prices, both following a percentage change in total number of the U.S. COVID-19 cases. The results suggest evidence for complete pass-through of oil prices into gasoline spot prices, whereas the corresponding pass-through into gasoline retail prices is about 29 percent in the long run.

Heterogeneity of Edgeworth Cycle Period in Retail Gasoline Prices

Heterogeneity of Edgeworth Cycle Period in Retail Gasoline Prices

Vertical Disintegration: The Effect of Refiner Exit from Gasoline Retailing on Retail Gasoline Pricing

The net effect of vertical integration on consumer welfare depends on the magnitude of the price reductions resulting from the elimination of double marginalization at the integrated firm and the price increases resulting from higher input prices charged to un-integrated competitors. In this paper, we estimate both of these effects in the U.S. gasoline industry by examining the change in relative retail gasoline prices after refiners exited gasoline retailing beginning in the mid-2000s. Using station-level price data from Florida and New Jersey, we find that double marginalization caused retail prices to increase by about 1.2 cents-per-gallon. Our estimates of the raising rival’s cost effect, while sensitive to the choice of control group, are of a similar magnitude. On net, we find that the average retail price of gasoline was effectively unchanged as the result of vertical separation.

Location Basis Differentials in Crude Oil Prices

We examine the long-run pricing relationship among crude oil prices at the North Sea (Brent) and Cushing (WTI) delivery points. The Brent-WTI location basis differential is stable until December 2009, but it widens to record levels in the next two years. We report on recent changes in the crude oil market that causes the prices to move apart. Brent and WTI prices are cointegrated prior to this structural break, but not between 2010 and 2015. Since the U.S. lifted the crude oil export ban in December 2015, Brent and WTI prices have reintegrated. U.S. retail gasoline prices respond to Brent and WTI before January 2010 and then only to Brent afterwards.

Regulation of retail gasoline prices

Three regulatory frameworks, (i) price changes are allowed only once per day; (ii) increases are allowed once a day at a specific time, but decreases are allowed at any time; and (iii) a maximum markup is allowed, are compared in a lab experiment to an unregulated benchmark market without any regulation. We examine them in a simple spatial model with elastic demand. The results reveal that the three price regulation systems differ significantly regarding their impact on gas station profits and consumer welfare. Allowing price changes only once per day seems favorable, while restricting price increases leads to higher prices.

Do directional predictions of US gasoline prices reveal asymmetries?

This study employs a directional forecasting approach to re-examine the possible “rockets and feathers” effect, using monthly crude oil and US retail gasoline prices for 1986–2018. We show that, for 1986–1999 (2000–2018), changes in crude oil prices accurately predict directional change in gasoline prices under symmetric (asymmetric) loss. This means that our results lend support to the “rockets and feathers” effect only for 2000–2018. For this period, upward moves in oil prices predict upward moves in gasoline prices up to three months ahead with a reasonably high accuracy rate (ranging from 0.70 to 0.79), while downward moves in oil prices predict downward moves in gasoline prices with a low accuracy rate (ranging from 0.48 to 0.58). These predictions, while of value to a user who assigns high (low) cost to incorrect upward (downward) moves in gasoline prices, lend support to the “rockets and feathers” effect.