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Asymmetric Reactions of Retail Gasoline Prices on the Changes in Crude Oil Prices in Chosen US Cities

In: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Hybrid Conference, Opatija, Croatia, 17-18 June 2022

Author

Listed:
  • Szomolányi, Karol
  • Lukáčik, Martin
  • Lukáčiková, Adriana

Abstract

Many empirical studies state that retail gasoline and diesel prices react more quickly when the crude oil price rises rather than decreases. In the paper, we confirm these asymmetric reactions of retail fuel prices in selected cities in the United States of America. We use the adjustment cost function in the linear-exponential form to derive nonlinear retail gasoline and diesel reaction functions. The correspondent model is estimated with the system's generalised method of moments. The model allows us to compute average one-gallon gasoline and diesel price biases from the increase in oil by one dollar per barrel caused by the given asymmetric reactions. The average biases differ from city to city; their values are between 0.02 cents in Los Angeles and 0.44 cents in Cleveland.

Suggested Citation

  • Szomolányi, Karol & Lukáčik, Martin & Lukáčiková, Adriana, 2022. "Asymmetric Reactions of Retail Gasoline Prices on the Changes in Crude Oil Prices in Chosen US Cities," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2022), Hybrid Conference, Opatija, Croatia, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Hybrid Conference, Opatija, Croatia, 17-18 June 2022, pages 9-15, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    • Handle: RePEc:zbw:entr22:268310
    DOI: 10.54820/entrenova-2022-0002
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    asymmetry; retail gasoline and diesel prices; linex adjustment cost function; generalised system method of moments;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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