California gasoline demand elasticity estimated using refinery outages

Armando R. Colina, Bulat Gafarov and Jens Hilscher

Energy Economics, 2025, vol. 148, issue C

Abstract: This paper presents new gasoline demand price elasticity estimates for California. We use unique characteristics of California’s gasoline market and a new set of proposed instruments. As a first step, we take advantage of California’s unique gasoline market, which is partially isolated from the rest of the United States due to environmental regulations. We control for persistent demand shocks and estimate a lower bound for the long-run elasticity of demand of −0.23. In the second step, we use a new set of instruments to control for simultaneity. We use detailed information on refinery outages to capture short-run supply shocks. Our estimate of long-run demand elasticity is −0.60.

Keywords: Capacity outages; Gasoline demand price elasticity; Instrumental variable estimation; California gasoline market (search for similar items in EconPapers)
JEL-codes: C22 C36 C51 D12 Q41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:148:y:2025:i:c:s0140988325003135

DOI: 10.1016/j.eneco.2025.108489

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