An econometric analysis of retail gasoline prices in a border metropolitan economy

Previous studies show that a variety of different variables influence retail gasoline price fluctuations. In the case of El Paso, Texas, those variables would include wholesale gasoline prices, local economic conditions, weather, and, more uniquely, cross-border economic variables associated with Ciudad Juarez, Chihuahua, in Mexico. To analyze the contributions of these variables to monthly price movements for gasoline in El Paso, a theoretical model is specified. From the latter construct, a reduced-form equation is extracted. That specification is then expressed within an error correction framework to allow accounting for both long-run and short-run behaviors in this metropolitan economy. Results indicate that the border poses a fairly substantial barrier to normal trade and purchasing patterns for this product within this specific region.