Journal article
Are petrol retailers less responsive to changes in wholesale or crude oil prices when they face lower competition? The case of Greater Sydney
Energy Policy, Vol.153, pp.1-14
2021
Abstract
Market efficiency is distorted when retailers are unwilling to pass on changes in wholesale costs or the price of oil (as a major production input cost) to motorists. Existing approaches to measuring pass-through parameters may obscure such behaviour because of the use of fixed-parameter models and/or aggregated price data across different locations and brands over time. We contribute to the literature by examining if there is a mismatch between wholesale and retail petrol prices across different brands supplying unleaded petrol within the same geographical location. To do so, we examine the effects of upstream shocks, arising from changes in oil or wholesale petrol prices, on the retail petrol prices of 672 stations in Sydney, Australia's largest city. We find that the pass-through parameters are significantly lower for stations with fewer competitors in their immediate proximity. When there are fewer than 13 petrol stations within a 5-km radius, or 33 stations within 10 km, irrespective of their brand, they become increasingly less responsive to changes in the wholesale petrol price or the price of crude oil. Our findings enhance market transparency and provide regulators with a rule of thumb that allows them to monitor the unleaded petrol market more effectively.
Details
- Title
- Are petrol retailers less responsive to changes in wholesale or crude oil prices when they face lower competition? The case of Greater Sydney
- Authors
- Abbas Valadkhani (Author) - Swinburne University of TechnologySajid Anwar (Author) - University of the Sunshine Coast, Queensland, USC Business School - LegacyArezoo Ghazanfari (Author) - RMIT UniversityJeremy Nguyen (Author) - Swinburne University of Technology
- Publication details
- Energy Policy, Vol.153, pp.1-14
- Publisher
- Elsevier Ltd
- DOI
- 10.1016/j.enpol.2021.112278
- ISSN
- 1873-6777
- Organisation Unit
- Indigenous and Transcultural Research Centre; University of the Sunshine Coast, Queensland; USC Business School - Legacy; School of Business and Creative Industries
- Language
- English
- Record Identifier
- 99522304702621
- Output Type
- Journal article
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