Deregulation of wholesale petrol prices: what happened to capital city petrol prices?

Alistair Davey

Australian Journal of Agricultural and Resource Economics, 2010, vol. 54, issue 1, 81-98

Abstract: Wholesale petrol prices were deregulated in August 1998. This paper will quantify the effect associated with the deregulation of wholesale petrol prices on relative retail prices for unleaded petrol in Adelaide, Melbourne and Sydney. This is done through Box-Jenkins autoregressive integrated moving average methodology coupled with Box and Tiao intervention analysis. Weekly price data will be used for Adelaide, Melbourne, and Sydney. It finds that from the beginning of 1999, deregulation coincided with relatively lower retail petrol prices for all three cities. In the absence of any other possible alternative explanation for the simultaneous fall in relative retail petrol prices across all three cities, it is concluded that this change was most likely associated with deregulation. These results suggest that regulation of wholesale petrol prices were ineffectual in terms of constraining capital city retail petrol prices at the very least and may have actually contributed towards relatively higher retail petrol prices. This also suggests that future policy interventions designed to constrain prices in the downstream petroleum industry should be very carefully considered. Copyright 2010 The Author. Journal compilation 2010 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd.

Date: 2010
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