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Regulatory capture in the US petroleum refining industry

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  • Robert Gmeiner

    (Kennesaw State University)

Abstract

The capture theory of regulation concludes that regulatory agencies tend to be captured by the firms they are regulating. This paper tests the capture theory in the recent environment of nuanced agency regulation by the administrative state, focusing on the US oil refining industry. Regulation has tended to narrow refiners’ margins, which harms nonintegrated oil refiners more than vertically integrated. Providing evidence of regulatory capture, complementary analysis of stock returns shows that regulations have benefited the stocks of vertically integrated firms. The narrowing of the margins is primarily due to rising input costs.

Suggested Citation

  • Robert Gmeiner, 2019. "Regulatory capture in the US petroleum refining industry," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(4), pages 459-498, December.
    • Handle: RePEc:spr:epolin:v:46:y:2019:i:4:d:10.1007_s40812-019-00134-w
    DOI: 10.1007/s40812-019-00134-w
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    More about this item

    Keywords

    Regulation; Crack spreads; Vertical integration; Rent seeking;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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