Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?

Borenstein, Severin; Cameron, A. Colin; Gilbert, Richard

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Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?

QUARTERLY JOURNAL OF ECONOMICS, Vol. 112, No. 1, February 1997

Posted: 10 Sep 1997

See all articles by Severin Borenstein

Severin Borenstein

University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER)

A. Colin Cameron

University of California, Davis - Department of Economics

Richard Gilbert

University of California, Berkeley - Department of Economics

There are 2 versions of this paper

Abstract

We test and confirm that retail gasoline prices respond more quickly to increases than to decreases in crude oil prices. Among the possible sources of this asymmetry are production/ inventory adjustment lags and market power of some sellers. By analyzing price transmission at different points in the distribution chain, we attempt to shed light on these theories. Spot prices for generic gasoline show asymmetry in responding to crude oil price changes, which may reflect inventory adjustment effects. Asymmetry also appears in the response of retail prices to wholesale price changes, possibly indicating short-run market power among retailers.

JEL Classification: L71

Suggested Citation: Suggested Citation

Borenstein, Severin and Cameron, A. Colin and Gilbert, Richard J., Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?. QUARTERLY JOURNAL OF ECONOMICS, Vol. 112, No. 1, February 1997, Available at SSRN: https://ssrn.com/abstract=10883