On the dynamics of gasoline market integration in the United States: Evidence from a pair-wise approach

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper employs a pair-wise approach to examine regional integration in the US gasoline market. Using gasoline price data at the state level over a period of more than two decades, we find strong support for the view that the law of one price holds in regional markets, as more than 80% of bivariate price differentials turn out to be stationary. Furthermore, we uncover evidence that the speed at which prices converge to the long-run equilibrium depends upon the distance between states. Asymmetries are also present in this relationship. Our findings suggest that the more similar are states with respect to taxation, gas stations and refining capacity, the faster is the speed of adjustment towards the long-run equilibrium. Terms of use: Documents inJEL Classification: C33, Q47, R11.Keywords: Panel data, pair-wise approach, market integration, gasoline, speed of adjustment.♦ We are very grateful to two anonymous referees for their constructive comments and suggestions that helped to improve our paper. The usual disclaimer applies.

Rockets and Feathers: The Asymmetric Effect between China’s Refined Oil Prices and International Crude Oil Prices

“…In the U.S., many researchers argued that the response of gasoline prices to crude oil price changes was asymmetric [8][9][10][11][12][13][14]. Venditti [15] demonstrated the response of weekly gasoline and gasoil prices to crude oil price changes through using nonlinear impulse response functions and forecast accuracy tests.…”

On dynamic linkages of the state natural gas markets in the USA: Evidence from an empirical spatio-temporal network quantile analysis

“…Some previous literature has analysed the energy markets, either at a theoretical or at an empirical level. For example, focusing on the integration of regional retail fuel markets, Holmes et al (2013) considered the pair-wise approach (Pesaran, 2007) to test the regional integration in the US gasoline market, which verifies the law of one price in the regional gasoline markets in the US. This approach was also applied by Cárdenas et al (2017) on the diesel market integration in France.…”

“…As an indicator of the market that is highly influenced by local policy and market competition, the extent of integration or segregation among different local energy markets has received increasing attention in the energy economics literature (c.f., Cuddington and Wang, 2006;Holmes et al, 2013;Apergis et al, 2015;Ghoddusi, 2016, and the references therein). In particular, for the natural gas markets in the USA, since the policy of deregulation in the natural gas industry, the integration or segregation of the markets has become of wide interest not only by academics but also for investment decision-making by enterprises and energy policy-making by governments (Park et al, 2008;Apergis et al, 2015).…”

“…In particular, in empirical analysis, some key characters of the regional natural gas markets, e.g., features of the underground pipeline network, may not all be available to be considered, and empirical challenges hence arise as these unconsidered features are likely to be spatially correlated (c.f., Cuddington and Wang, 2006;Park et al, 2008;Arano and Velikova, 2009). Vector time series analysis and the pair-wise approach have often been adopted in analysing the integrations of regional energy markets in the literature (c.f., De Vany and Walls, 1993;Pesaran, 2007;Holmes et al, 2013). For example, De Vany and Walls (1993) used cointegration method to investigate the integrations by considering one hundred and ninety market pairs among twenty spatially separated natural gas markets in the U.S.. Park et al (2008) considered the relationships in mean among a relatively small number of eight North American natural gas spot markets by combining the advances in causal flow analysis with vector time series analysis.…”

“…For example, De Vany and Walls (1993) used cointegration method to investigate the integrations by considering one hundred and ninety market pairs among twenty spatially separated natural gas markets in the U.S.. Park et al (2008) considered the relationships in mean among a relatively small number of eight North American natural gas spot markets by combining the advances in causal flow analysis with vector time series analysis. Holmes et al (2013) applied the pair-wise approach to analyse the spatial market integrations in the US regional gasoline markets.…”