The Impact of Oil Refinery Market Power on Retail Fuel Prices in the European Union

The present study investigates the degree to which imperfect competition in the oil sector affects end retail prices. Specifically, we test how positive and negative price shocks in the oil market translate to final retail prices for petrol, diesel, and heating oil prices, focusing on the asymmetry...

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Bibliographic Details
Published in:Ekonomika - Vilniaus universitetas 2017-01, Vol.95 (3), p.37-51
Main Author: Zirgulis, Aras
Format: Article
Language:English
Subjects:
Asymmetry
Competition
Consumers
Crude oil
Crude oil prices
Diesel
Economic models
Gasoline
Gasoline prices
Heating
Heating oil
Hurricanes
Imperfect Competition
Market shares
Markets
Oil industry
Oil reserves
Petrol
Petroleum
Petroleum industry
Power
Price asymmetry
Prices
Pricing policies
Production capacity
Retail fuel price
Suppliers
Taxation
Uncertainty
Volatility
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Summary:The present study investigates the degree to which imperfect competition in the oil sector affects end retail prices. Specifically, we test how positive and negative price shocks in the oil market translate to final retail prices for petrol, diesel, and heating oil prices, focusing on the asymmetry of the price changes. We assume that the higher the level of imperfect competition, the more asymmetric the price change between the initial oil and final retail products will be. In addition, we also test the degree to which uncertainty, or oil price volatility, affects the final prices for these same products. We find that our proxy for market power does affect retail price asymmetries and that increasing volatility lowers retail price asymmetries.
ISSN:1392-1258
2424-6166
DOI:10.15388/ekon.2016.3.10327