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Asymmetric Price Transmission and Rent‐seeking in Road Fuel Markets: A Comparative Study of South Africa and Selected Eurozone Countries

Jonathan E. Ogbuabor, God'stime O. Eigbiremolen, Charles O. Manasseh and Ifeoma C. Mba

African Development Review, 2018, vol. 30, issue 3, 278-290

Abstract: This paper presents the first‐ever analysis of South African and Eurozone road fuel markets for the possibility that firms may be manipulating the tax system to conceal rent‐seeking behavior using the nonlinear ARDL model recently advanced by Shin et al. (). The paper also examines these markets for asymmetric price adjustment following changes in crude oil costs in the aftermath of the 2007–2008 Global Financial Crisis. Monthly data for gasoline, automotive diesel and costs of imported crude oil from November 2004 to August 2016 were used. The results indicate that while the Eurozone road fuel markets are fraught with the problems of long‐run rent‐seeking, rockets and feathers effect, and the possibility that firms may be exploiting the tax system to conceal rent‐seeking behaviors, the South African markets are free from these problems. Even though South Africa and the Eurozone countries have high oil import dependency ratios, this paper shows that government regulatory activities somewhat account for the difference in market outcomes.

Date: 2018
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