Slippery Up and Sticky Down? An Analysis of the Auckland Regional Fuel Tax

Joshua McNamara ()
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Joshua McNamara: University of Waikato, https://www.waikato.ac.nz/about/faculties-schools/management/

Working Papers in Economics from University of Waikato

Abstract: This paper examines whether retail fuel prices in New Zealand adjust asymmetrically to cost shocks, using the introduction and repeal of the Auckland Regional Fuel Tax (ARFT) as a natural experiment. The ARFT imposed a 10 cents-per-litre levy on fuel sold in Auckland from July 2018 to June 2024, while neighbouring regions remained untaxed. Exploiting these sharp and opposite policy changes, the analysis employs a difference-in-differences framework using daily, station-level fuel price data from Auckland, Northland, and Waikato. At the aggregate level, fuel prices increased by 10.8 cents per litre following the tax introduction and fell by 11.6 cents per litre after its repeal, indicating near-complete and symmetric pass-through on average. However, substantial spatial heterogeneity emerges when local competitive conditions are considered. Among stations located close to competitors operating under a different tax regime, prices rose almost fully after the tax was introduced but fell by only around three-quarters as much following its removal. Distance-based interaction estimates confirm that pass-through varies systematically with proximity to oppositely treated competitors, consistent with localised asymmetric price transmission driven by spatial competition. These findings show that while fuel prices may adjust symmetrically on average, asymmetric adjustment can persist in local markets, with important implications for the incidence of regional fuel taxes and their repeal.

Keywords: asymmetric price transmission; price transmission; fuel tax; spatial competition; difference-indifferences; retail fuel prices (search for similar items in EconPapers)
JEL-codes: H22 L11 Q41 R12 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2026-02-02
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Persistent link: https://EconPapers.repec.org/RePEc:wai:econwp:26/01

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