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Price Effects of Boutique Motor Fuels: Federal Environmental Standards, Regional Fuel Choices, and Local Gasoline Prices

Abstract:
Federal clean air regulations have spawned a proliferation of motor fuel types that have created differentiated markets for motor fuels, increased the cost of supplying these fuels, and reduced the capacity of the supply infrastructure. In this paper we examine wholesale gasoline prices in 99 US cities over a time horizon of 204 weeks using a panel data regression model to explain fuel prices as a function of fuel attributes, the price of crude oil, and seasonal and city-market-specific effects. Our results show that fuel prices are related to the use of a special blend not widely available in the region and more costly to make, and the situation of the particular city market in relation to major refining centers or other sources of supply.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation; Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
Q54 - Climate; Natural Disasters and Their Management; Global Warming

Keywords: Environmental regulation, gasoline prices, Boutique motor fuels, US, air pollution

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-8


Published in Volume 28, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.