Domestic Effects of Federal Regulation of Oil and Gas Industries

摘要

The capture theory of regulation concludes that regulatory agencies tend to be captured by the firms they are regulating, so that regulations benefit those regulated firms. This paper examines the cumulative effects of federal regulations on the oil and gas industry and finds that regulations have benefited the more powerful economic interests in that industry, consistent with the capture theory. Regulations have tended to narrow refiners' margins and are associated with positive return and negative volatility responses for stocks of vertically integrated firms, which are the largest players in the industry. This narrowing of margins is mostly a long-term effect, but has some short run effects more on input prices than output prices, further benefiting vertically integrated firms. Refining regulations affect input prices more than output prices primarily by affecting demand for certain types of crude oil. Effects of regulation on input prices and even relative quantities of different inputs are robust, whereas effects of regulation on output prices are far more tenuous. There is no clear evidence that consumers are worse off because of the regulatory environment, but the robust empirical evidence does indicate that the regulatory environment differentially benefits large vertically integrated producers.