Retail and Wholesale Gasoline Price Adjustments in Response to Oil Price Changes

19 Pages Posted: 6 May 2014 Last revised: 4 Nov 2015

See all articles by Donald Bumpass

Donald Bumpass

Sam Houston State University - College of Business Administration - Department of Economics and International Business

Vance Ginn

Texas Public Policy Foundation

M. H. Tuttle

Sam Houston State University - College of Business Administration - Department of Economics and International Business

Date Written: October 2015

Abstract

This research examines the long-run relationship between the spot oil price and retail and wholesale gasoline prices. Recent research suggests that the response of the retail gasoline price is faster and the size of the change is larger, in magnitude, following a crude oil price increase compared with periods when the crude oil price is falling; however, some recent papers examining potential asymmetries present mixed results. Our results from a common threshold model estimating the adjustment of gasoline prices and the spot oil price suggest a long-run relationship between retail and wholesale gasoline prices and the crude oil price. Further, results here suggest that both retail and wholesale gasoline prices respond symmetrically to an oil price shock in the long run, indicating little market power by gas stations and wholesalers.

Keywords: Gasoline prices, Oil prices, Cointegration, Threshold Models, Asymmetric price adjustment

JEL Classification: C32, D40, Q40

Suggested Citation

Bumpass, Donald and Ginn, Vance and Tuttle, Markland H, Retail and Wholesale Gasoline Price Adjustments in Response to Oil Price Changes (October 2015). Energy Economics, Vol. 52, No. A, 2015: 49-54. Available at SSRN: https://ssrn.com/abstract=2433339 or http://dx.doi.org/10.2139/ssrn.2433339

Donald Bumpass

Sam Houston State University - College of Business Administration - Department of Economics and International Business ( email )

SHSU Box 2118
Huntsville, TX 77341-2118
United States

Vance Ginn

Texas Public Policy Foundation ( email )

901 Congress Avenue
Austin, TX 78701
United States
7134785255 (Phone)

HOME PAGE: http://www.texaspolicy.com/experts/detail/vance-ginn

Markland H Tuttle (Contact Author)

Sam Houston State University - College of Business Administration - Department of Economics and International Business ( email )

SHSU Box 2118
Huntsville, TX 77341-2118
United States

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