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U.S. Midwest Gasoline Pricing and the Spring 2000 Price Spike

Abstract:
Gasoline prices increased dramatically in the U.S. Midwest in the summer of 2000, generating allegations of collusion among gasoline marketers. We examine the causes of the price increase, and find no evidence to support the collusion story. Instead, a combination of industry characteristics and unanticipated problems in switching to a new, federally-mandated gasoline specification caused the spike. Once prices rose, firms responded as quickly as possible to get additional supplies to affected markets.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Energy Modeling – Energy Data, Modeling, and Policy Analysis

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination

Keywords: Gasoline markets, gasoline price spikes, US Midwest, Refinery capacity, Pipelines

DOI: 10.5547/ISSN0195-6574-EJ-Vol24-No3-5


Published in Volume24, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.