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Asymmetric pricing of diesel at its source

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  • Valadkhani, Abbas
  • Smyth, Russell
  • Vahid, Farshid

Abstract

Competitive diesel pricing can yield tangible benefits to truck drivers, fleet operators and farmers. The ability, and willingness, of wholesale distributors to asymmetrically pass on changes in diesel costs to consumers can adversely distort the market. Existing studies for Australia have focused on petrol (gasoil) prices, while there has been no testing for asymmetry in diesel prices. We test for rocket and feather effects in Australian wholesale diesel prices at their source. We find that in all seven seaport cities, when the price of oil goes up, diesel prices shoot up like a rocket and when the price of oil decreases, diesel prices fall like a feather. The asymmetric responses are more noticeable when oil prices are rising than falling. Results support the view that suppliers adopt or coordinate almost the same asymmetric pricing behaviour before distributing diesel among retailers.

Suggested Citation

  • Valadkhani, Abbas & Smyth, Russell & Vahid, Farshid, 2015. "Asymmetric pricing of diesel at its source," Energy Economics, Elsevier, vol. 52(PA), pages 183-194.
    • Handle: RePEc:eee:eneeco:v:52:y:2015:i:pa:p:183-194
    DOI: 10.1016/j.eneco.2015.10.010
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    Cited by:

    1. Bahram Adrangi & Arjun Chatrath & Joseph Macri & Kambiz Raffiee, 2018. "U.S. Diesel Fuel Price Responses To The Global Crude Oil Supply And Demand," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 13(04), pages 1-25, December.
    2. 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.
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    4. Bragoudakis, Zacharias & Degiannakis, Stavros & Filis, George, 2020. "Oil and pump prices: Testing their asymmetric relationship in a robust way," Energy Economics, Elsevier, vol. 88(C).
    5. D. O. Olayungbo & T. A. Ojeyinka, 2022. "Crude oil prices pass-through to retail petroleum product prices in Nigeria: evidence from hidden cointegration approach," Economic Change and Restructuring, Springer, vol. 55(2), pages 951-972, May.
    6. Valadkhani, Abbas & Smyth, Russell, 2018. "Asymmetric responses in the timing, and magnitude, of changes in Australian monthly petrol prices to daily oil price changes," Energy Economics, Elsevier, vol. 69(C), pages 89-100.
    7. Zacharias Bragoudakis & Stavros Degiannakis & George Filis, 2019. "Oil and pump prices: is there any asymmetry in the Greek oil downstream sector?," Working Papers 268, Bank of Greece.
    8. Cook, Steven & Fosten, Jack, 2019. "Replicating rockets and feathers," Energy Economics, Elsevier, vol. 82(C), pages 139-151.
    9. Dugan, Michael T. & Turner, Elizabeth H. & Thompson, Mark A. & Murray, Susan M., 2017. "Measuring the financial impact of environmental regulations on the trucking industry," Research in Accounting Regulation, Elsevier, vol. 29(2), pages 152-158.
    10. Albulescu, Claudiu Tiberiu & Mutascu, Mihai Ioan, 2021. "Fuel price co-movements among France, Germany and Italy: A time-frequency investigation," Energy, Elsevier, vol. 225(C).

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    More about this item

    Keywords

    Diesel pricing; Wholesale; Asymmetry; Australia;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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