Energy Sector’s Monopoly Rent-seeking and Supplementary Time-series Analysis in the Case of Azerbaijan

Abstract

In this paper, energy sector’s monopoly behavior is analyzed in the case of Azerbaijan by referring to the literature of Dutch disease and rent-seeking. As a theoretical background, a new general equilibrium model is also developed in order to explain unusual surge of gasoline prices in Azerbaijan during the decreasing global oil prices. The paper shows the relationship between crude oil price and local gasoline prices (rent-seeking in this paper). There is a cointegrating relation between two variables under Johansen Cointegration Test and it supports the idea in the theoretical general equilibrium model. Monopolies use higher local gasoline prices as rent-seeking during decreasing crude oil prices for covering their losses due to diminishing revenues from oil exports.