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Do petrol prices rise faster than they fall? Evidence from the UK retail and wholesale petrol sectors

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  • Amountzias, Chrysovalantis

Abstract

This study investigates the presence of price asymmetries in the UK retail and wholesale petrol sectors over the period of January 2020–July 2022. The scope of this research is to explore whether petrol prices rise faster than they fall according to changes in input costs, namely fuel and international crude oil prices for the retail and wholesale sector respectively. As the time sample considers the shocks of covid-19 restrictions and rising inflation, the presence of structural breaks is assumed which may contribute to asymmetric behaviour. The Autoregressive Distributive Lag (ARDL) approach is implemented in the pricing equation of the model by formulating four versions for each sector, according to the presence of asymmetries and price-cost margins. The results provide significant evidence of price asymmetries in the retail petrol sector; however, such asymmetries are less pronounced over high margin periods. The wholesale sector is found to be more flexible to changes in crude oil prices as asymmetries are less persistent throughout the sample. Therefore, consumers face rigid petrol prices because of retail firms’ decisions, which should be the focus of policy makers.

Suggested Citation

  • Amountzias, Chrysovalantis, 2023. "Do petrol prices rise faster than they fall? Evidence from the UK retail and wholesale petrol sectors," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).
    • Handle: RePEc:eee:joecas:v:28:y:2023:i:c:s1703494923000385
    DOI: 10.1016/j.jeca.2023.e00326
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    Keywords

    Petrol prices; Crude oil prices; Asymmetries; Retail petrol sector; Wholesale fuel sector; UK;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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