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Spatial spillovers in US wholesale gasoline markets
Author(s) -
Kucher Oleg,
Burnett J. Wesley,
Lacombe Donald
Publication year - 2018
Publication title -
papers in regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.937
H-Index - 64
eISSN - 1435-5957
pISSN - 1056-8190
DOI - 10.1111/pirs.12270
Subject(s) - gasoline , economics , intuition , econometric model , econometrics , economic geography , engineering , philosophy , epistemology , waste management
Abstract This paper analyses how oil industry‐related activities in neighbouring gasoline markets affect local markets. Our contribution consists of applying spatial econometric models to better understand pricing behaviour in US gasoline markets and the spatial phenomena unique to this particular industry. We find that neighbouring state‐level gasoline price variation explains a large portion of the variation of in‐state (or local) gasoline prices. Consistent with intuition, the empirical results imply that wholesale gasoline prices are positively affected by state and federal‐level gasoline content regulations. Further, our results suggest that changes in state‐level wholesale gasoline prices respond to both in‐state and neighbouring‐state inventory levels.