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Abstract
Wholesale petrol prices were deregulated in August 1998. This paper will quantify the
effect associated with the deregulation of wholesale petrol prices on relative retail
prices for unleaded petrol in Adelaide, Melbourne and Sydney. This is done through
Box–Jenkins autoregressive integrated moving average methodology coupled with
Box and Tiao intervention analysis. Weekly price data will be used for Adelaide,
Melbourne, and Sydney. It finds that from the beginning of 1999, deregulation
coincided with relatively lower retail petrol prices for all three cities. In the absence of
any other possible alternative explanation for the simultaneous fall in relative retail
petrol prices across all three cities, it is concluded that this change was most likely
associated with deregulation. These results suggest that regulation of wholesale petrol
prices were ineffectual in terms of constraining capital city retail petrol prices at the
very least and may have actually contributed towards relatively higher retail petrol
prices. This also suggests that future policy interventions designed to constrain prices
in the downstream petroleum industry should be very carefully considered.