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Competition, regulation, and pricing behavior in the Spanish retail gasoline market

Ignacio Contín Pilart, Aad F. Correljé and María Blanca Palacios

No 2006-02, BILTOKI from Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística)

Abstract: The restructuring of the Spanish oil industry produced a highly concentrated oligopoly in the retail gasoline market. In June 1990 the Spanish government introduced a system of ceiling price regulation in order to ensure that "liberalization" was accompanied by adequate consumer protection. This paper examines the pricing behavior of the retail gasoline market using multivariate error correction models over the period January 1993 (abolishment of the state monopoly)-December 2004. The results suggest that gasoline retail prices respond symmetrically to increases and decreases in the spot price of gasoline. However, one the ceiling price regulation was abolished, the "collaboration" between the government and the major operators, Repsol-YPF and Cepsa-Elf in order to control the inflation rate results in a slower rate of increase (decrease) of gasoline retail prices when gasoline spot prices went up (went down) than elsewhere in the European Union. Finally, retail margins were by the end of our timing period of analysis, as in the first years after the abolishment of the state monopoly, well above the European ones.

Keywords: competition; regulation; pricing behavior; gasoline market (search for similar items in EconPapers)
JEL-codes: L11 L43 L51 L71 (search for similar items in EconPapers)
Date: 2006
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Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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