the Determinants of Retail Fuel Prices in the EU Evidence from the Spatial Panel Quantile Regression

37 Pages Posted: 25 Jan 2019

See all articles by Xiaohang Ren

Xiaohang Ren

University of Southampton

Zudi Lu

University of Southampton

Yukun Shi

University of Glasgow; University of Leicester

Cheng Yan

Durham Business School

Date Written: January 13, 2019

Abstract

We propose a novel spatial panel quantile regression method to investigate the impact of crude oil and carbon prices and neighboring fuel prices on regional retail fuel prices in the EU markets. This approach captures the changing price shock propagation and cross-market dependency of retail fuel markets at different levels of quantiles. Empirically, we show that the impact of these determinants on retail fuel prices are heterogeneous and asymmetric across quantiles. Specifically, we find a positive price spill-over from neighboring countries’ retail fuel markets to the local retail fuel markets (spatial effects) at different quantiles. The impact of carbon futures prices on the regional retail fuel markets is positive with low crude oil prices and increases across quantile levels. Crude oil prices have a positive influence on retail fuel prices, especially at low quantiles. Our fresh results hold critical implications for energy risk management and policy-making processes.

Keywords: spatial panel quantile model, retail fuel price, carbon futures price, oil market, cross-market integration

JEL Classification: C31, C33, Q41, R41

Suggested Citation

Ren, Xiaohang and Lu, Zudi and Shi, Yukun and Yan, Cheng, the Determinants of Retail Fuel Prices in the EU Evidence from the Spatial Panel Quantile Regression (January 13, 2019). Available at SSRN: https://ssrn.com/abstract=3315684 or http://dx.doi.org/10.2139/ssrn.3315684

Xiaohang Ren

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Zudi Lu

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Yukun Shi (Contact Author)

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

University of Leicester ( email )

University Road
Leicester, LE1 7RH
United Kingdom

Cheng Yan

Durham Business School ( email )

Mill Hill Lane
Durham, Durham DH1 3LB
United Kingdom

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