Are the transport fuel retail markets regionally integrated in Spain? Evidence from price transmission

Abstract

In this paper we explore whether the Spanish retail fuel markets are integrated at the regional level. We perform a comparative analysis of the transmission of international wholesale fuel prices to retail fuel prices. Our results are in favor of market segmentation, since the degree of cost pass-through differs noticeably across provinces (NUTS 3) and this outcome is clearly robust to the exclusion of the island provinces. We also found that cost pass-through is more similar for those provinces belonging to the same autonomous community (NUTS 2). It is suggested that different regulations and criteria regarding the granting of administrative authorizations from the autonomous communities could be hindering the integration of geographical markets.