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The asymmetric effects of COVID19 on wholesale fuel prices in Australia

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  • Valadkhani, Abbas
  • Ghazanfari, Arezoo
  • Nguyen, Jeremy
  • Moradi-Motlagh, Amir

Abstract

This paper examines the effects of the number of active COVID19 cases on the wholesale prices of diesel and unleaded petrol (gasoline) across seven Australian states using daily data from 1 Jan 2020–11 September 2020. Our results indicate that statistically significant asymmetries with respect to COVID19 are observed in both wholesale unleaded petrol and diesel prices in all seven markets. When crude oil prices are falling substantially, the number of active COVID19 cases is highly significant in a negative relationship with petrol prices. However, when oil prices are rising (or not falling substantially), the negative effects of such a pandemic on fuel prices perplexingly disappear or become smaller. We find that the negative effects of COVID19 on diesel prices are more pronounced in more population-dense capital cities (i.e. Sydney and Melbourne). It is surprising to observe that the effects of COVID19 pandemic are driven by changes in oil prices: rising oil prices can substantially reduce the negative effect of this health pandemic on fuel prices. Our findings complement concerns from the national competition commission that while fuel prices have recently fallen to decades-long lows, fuel profit margins are at record high levels.

Suggested Citation

  • Valadkhani, Abbas & Ghazanfari, Arezoo & Nguyen, Jeremy & Moradi-Motlagh, Amir, 2021. "The asymmetric effects of COVID19 on wholesale fuel prices in Australia," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 255-266.
    • Handle: RePEc:eee:ecanpo:v:71:y:2021:i:c:p:255-266
    DOI: 10.1016/j.eap.2021.05.003
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