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

Abbas Valadkhani, Sajid Anwar, Arezoo Ghazanfari and Jeremy Nguyen

Energy Policy, 2021, vol. 153, issue C

Abstract: 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.

Keywords: Unleaded petrol; Retail price; Threshold regressions; Australia (search for similar items in EconPapers)
JEL-codes: C24 D40 L50 Q41 Q43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301421521001476
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:153:y:2021:i:c:s0301421521001476

DOI: 10.1016/j.enpol.2021.112278

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().