Inventories and Wholesale Gasoline Price Dynamics
26 Pages Posted: 15 Jul 2009
Date Written: October 30, 2008
Abstract
This paper sheds new light on the asymmetric short-run dynamics of US gasoline prices. The odel is inspired by Pindyck’s inventory model of commodity price dynamics, that stresses the importance of volatility in crude oil markets for short-run market dynamics. We show that after February 1999 asymmetry in gasoline price dynamics is caused by changes in the net marginal convenience yield: higher costs of marketing and storage lead to rising gasoline prices, whereas a drop in these costs hardly affects gasoline prices.
Keywords: Asymmetry, Gasoline prices, Inventories, Volatility
JEL Classification: C22, D43, E31, L11, Q40
Suggested Citation: Suggested Citation
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