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Economic Policy and the Price of Gasoline

Shuyi Jiang

Abstract


Retail and wholesale gasoline markets in the U.S. have experienced significant price volatility in the past twenty years. This paper uses the most recent monthly panel data from 1983 to 2007 for 48 states to analyze factors that influence the retail and wholesale prices of gasoline. My major finding is that retail and wholesale prices of gasoline are determined mainly by the price of crude oil and federal and state specific taxes on gasoline. Two unique regulatory factors in the petroleum industry are included: divorcement law and self-service ban. Estimation results show that both restrictions will lead to an even higher retail price of gasoline.

Keywords


economic policy; gasoline price; petroleum refining; reduced-form model; partial adjustment model.

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