Spatial spillovers in US wholesale gasoline markets

This paper analyses how oil industry-related activities in neighbouring gasoline markets affect local markets. Our contribution consists of applying spatial econometric models to better understand pricing behaviour in US gasoline markets and the spatial phenomena unique to this particular industry. We find that neighbouring state-level gasoline price variation explains a large portion of the variation of in-state (or local) gasoline prices. Consistent with intuition, the empirical results imply that wholesale gasoline prices are positively affected by state and federal-level gasoline content regulations. Further, our results suggest that changes in state-level wholesale gasoline prices respond to both in-state and neighbouring-state inventory levels.