A Hedonic Analysis of Crude Oil: Have Environmental Regulations Changed Refiners' Valuation of Sulfur Content?

The hedonic approach is used in this paper to study refiners' valuation of crude oil, an intermediate and differentiated product whose characteristics are determined by nature. In paiticular, this paper examines whether environmental regulations aimed at abating sulfur emissions have changed refiners' valuation of sulfur content in crude oil in the past two decades. The estimation results show that crude oil hedonic price equations are strongly nonlinear in gravity and sulfur, and refiners' valuation of sulfur changed significantly over time and exhibited a pattern consistent with the timing and effect of environmental regulations.