Environmental Regulation and Rationalization in the Retail Gasoline Industry

28 Pages Posted: 2 Jul 2008 Last revised: 26 Sep 2008

See all articles by Andrew Eckert

Andrew Eckert

University of Alberta - Department of Economics

Heather Eckert

University of Alberta - Department of Economics

Date Written: September 1, 2008

Abstract

The number of gasoline stations in Canada fell by 40 percent between 1989 and 2000. Many demand and competition related explanations have been offered for this rationalization. While industry sources cite stiffer environmental regulations as a factor in station closures, the role of environmental regulations in station shutdowns has not been formally assessed. In 1988 the Canadian Council of Resource and Environment Ministers published an Environmental Code of Practice recommending that unprotected petroleum storage tanks be upgraded or replaced according to a schedule based on the age of the tank and that nearby unprotected tanks also be upgraded or removed. If this Code were adopted by provincial regulators, the fixed cost of operating a gas station would increase in proportion to the age structure and protection of the station's tanks. Studying closure decisions in Winnipeg, MB, we find mixed evidence that stations with unprotected tanks were more likely to close during rationalization.

Keywords: Petroleum Storage, Rationalization, Retail Gasoline, Underground Storage Tanks

JEL Classification: K20, Q58, L81

Suggested Citation

Eckert, Andrew and Eckert, Heather, Environmental Regulation and Rationalization in the Retail Gasoline Industry (September 1, 2008). CLEA 2008 Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1154061 or http://dx.doi.org/10.2139/ssrn.1154061

Andrew Eckert

University of Alberta - Department of Economics ( email )

8-14 Tory Building
Edmonton, Alberta T6G 2H4
Canada

Heather Eckert (Contact Author)

University of Alberta - Department of Economics ( email )

8-14 Tory Building
Edmonton, Alberta T6G 2H4
Canada
780 492-7648 (Phone)
780 492-3300 (Fax)

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