Estimating the Price Impact of the Victorian Terminal Gate Pricing Scheme

The Victorian Government introduced regulated terminal gate pricing in August 2001. This article will quantify the impact of terminal gate pricing on relative Melbourne and country Victoria retail prices for unleaded petrol through Box-Jenkins autoregressive integrated moving average methodology and Box and Tiao intervention analysis using weekly price data. For Melbourne the best fit of the data suggests that the regulatory intervention took effect in late October 2001 and was associated with a statistically significant increase in relative retail petrol prices of around 2.2 cents per litre. For country Victoria the best fit of the data suggests that the regulatory intervention took effect in early November 2001 and was associated with a statistically significant increase of around 2.1 cents per litre, although this result should be treated with caution. Claims that the increase in Melbourne retail petrol prices accompanying the introduction of terminal gate pricing was part of a wider trend towards relatively higher retail petrol prices across mainland capital cities was tested in regard to Adelaide and Sydney and found to be without empirical support. It is concluded that terminal gate pricing made Melbourne motorists unambiguously worse off and possibly country Victoria motorists as well