New publication by Mats Kahl in Energy Economics
2024-11-07
Petrol prices in Poland are significantly lower than in Germany, which can be attributed, in particular, to lower taxes in Poland. The lower gasoline prices in Poland could lead to lower prices in the German border region due to cross-border competition. However, the latest study by Mats Kahl paints a different picture.
In the study "Cross-border competition in the gasoline retail market: Impact of proximity at the German-Polish border," Mats Kahl analyzes how persistently lower petrol prices in Poland influence pricing in the German border region. Based on a data set of all gasoline prices in the German border region and an exact recording of the driving distances between the gas stations, Mats Kahl estimates how an additional kilometer distance to the nearest Polish competitor affects the price of German gas stations.
The study shows that German petrol stations do not enter into price competition with their Polish counterparts. The descriptive analysis of the petrol station infrastructure in the German border region reveals an increasingly low density of petrol stations as one approaches the Polish border, together with a growing share of premium brands. These findings may reflect the effect of significantly lower taxes in Poland, discouraging German petrol stations from establishing themselves near the border and effectively ruling out cross-border price competition.
The results indirectly suggest significant fuel tourism, with people driving across the border to buy cheaper gasoline. Individuals apparently incur additional monetary and time costs in order to save slightly on refueling. However, fuel tourism also brings considerable economic and environmental disadvantages, which are not sufficiently taken into account in individual refueling decisions. In addition to lost tax revenue due to consumers filling up abroad, infrastructure costs also increase, for example, due to increased road wear and tear. Furthermore, the additional driving leads to greater environmental pollution and promotes climate change.
This study, published in the renowned journal Energy Economics, provides important insights for understanding the fuel market dynamics in border regions. The complete study is available under an open-access license at https://doi.org/10.1016/j.eneco.2024.107961