Fuel prices at petrol stations in touristic cities

Abstract

While it may seem obvious from common sense that retail fuel prices should be higher in touristic rather than in nontouristic cities, the related empirical literature has failed either to clearly support this assumption or to qualify and quantify the effect of tourism on retail fuel prices. Using a self-created data set that includes prices across a large sample of petrol stations located in mainland Spain and the Balearic Islands, we seek to evaluate the effects of tourism on local destination retail petrol prices. The estimations prove three main effects: Petrol prices are higher in cities with high levels of tourism, nearby beaches, and/or with the socioeconomic influence of a national park. In fact, petrol stations add a margin of around 6.6% and 6.4% for unleaded gasoline 95 and diesel, respectively, in touristic cities. Second, the more touristic the city, the higher these prices. Third, in the case of touristic municipalities, the percentage of travelers from abroad and being within the area of influence of a national park are two of the main drivers that explain this overpricing.