Alternative Fuel Price Transmission

Alternative fuels played a more and more important role in the U.S. fuel market in the last few decades. While most previous literature focused on oil, gasoline and biofuel prices, the studies on the topic of multiple alternative fuel prices were limited. Using U.S. fuel price data from the seven Petroleum Administration for Defense Districts (PADD), our study explored the horizontal price transmission between gasoline and alternative fuel and the vertical price transmission between oil and alternative fuels. Our results show that gasoline prices are positively correlated to alternative fuel prices in general. From the standpoint of a specific fuel, ethanol and biodiesel in the full observations and at the public stations are positively correlated to gasoline prices. Additionally, we show gasoline returns positively correspond with diesel and biodiesel returns and crude oil returns have a positive correlation with diesel, propane and biodiesel returns