Could transport costs be lower?: the use of a variance screen to evaluate competition in the petrol market in Spain

Abstract

Petrol is an important factor not only in transport costs but also in household consumption. However, some doubts exist as to the level of competition in the worldwide retail petrol market. The international petrol market at the retail level has been studied from different perspectives in the economic literature, but studies of the issue in Spain are much more recent. This paper analyses prices in the market assuming that in noncompetitive markets prices are higher and the variation coefficient is lower. We use weekly retail petrol (petrol 95 and diesel) price data from the ten biggest cities in Spain to employ a variance screen to detect suspicious behaviour in retailing. We conclude that this market shows low price dispersion, regardless of brand or city. However, this symmetrical behavior in prices among all petrol stations does not enable us to reach any robust conclusions as to the existence of collusive behaviour in the Spanish petrol market.