Pipes, Trains and Automobiles: Explaining British Columbia’s High Wholesale Gasoline Prices

Garret Fellows

The Energy Journal, 2022, vol. 43, issue 5, 139-160

Abstract: I modify a coumot oligopoly model to examine the effect of pipeline capacity constraints on regional wholesale gasoline prices. The model includes a discontinuous supply function for a common input (transportation) with a constrained low-cost mode (pipelines) and an unconstrained higher cost mode (rail, truck or barge). The equilibrium outcome demonstrates a piecewise linear relationship between the low-cost capacity constraint and the equilibrium price. The shape of the transportation supply curve is also shown to affect the relationship between firm average marginal costs and the equilibrium price. I also present a test of the model’s implications, demonstrating that it is able to explain a recent pronounced increase in wholesale gasoline prices for cities in British Columbia Canada. While the exercise is motivated by a specific market, the model and its implications apply to a broad set of discussions on inter-regional arbitrage in the context of imperfect competition.

Keywords: Wholesale Gasoline Pricing; Pipeline Regulation; Cournot (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.5547/01956574.43.5.gfel (text/html)

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:sae:enejou:v:43:y:2022:i:5:p:139-160

DOI: 10.5547/01956574.43.5.gfel

Access Statistics for this article

More articles in The Energy Journal
Bibliographic data for series maintained by SAGE Publications ().