Social and environmental events disrupt the relation between motor gasoline prices and market fundamentals

Robert Kaufmann and Colter Schroer

Energy Economics, 2023, vol. 126, issue C

Abstract: After the Russian invasion of Ukraine, higher prices for motor gasoline re-ignited debate about price discovery; do market fundamentals largely determine motor gasoline prices. We evaluate the degree to which market fundamentals, as proxied by prices for crude oil, taxes on motor gasoline, inventories of crude oil and motor gasoline, and refinery utilization rates, can account for prices of motor gasoline. During most of the 2010–2022 sample, these proxies for market fundamentals account for weekly changes in the price for motor gasoline. But a saturation indicator procedure identifies weeks after the Russian invasion of Ukraine, Hurricane Harvey, and the start of the Covid-19 pandemic when prices for crude oil, taxes on motor gasoline, inventories of crude oil and motor gasoline, and refinery utilization rates fail to account for weekly changes in the price of motor gasoline in a statistically significant manner. During these weeks, the price of motor gasoline rises by up to $0.25 per gallon relative to that implied by market fundamentals, which increased expenditures on motor gasoline $10 to $72 per licensed driver.

Keywords: Motor gasoline prices; Rockets and feathers; Market fundamentals (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:126:y:2023:i:c:s0140988323004127

DOI: 10.1016/j.eneco.2023.106914

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