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Do Retail Petrol Prices Rise More Rapidly Than They Fall in Australia’s Capital Cities?

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Abstract

This paper examines the long-run and short-run determinants of unleaded petrol prices in Australia’s capital cities using monthly data to test whether prices respond asymmetrically to external shocks. In the long-run petrol prices are mainly determined by the Tapis crude oil and Singapore petrol prices. There is some evidence of asymmetric price adjustments in the short-run since petrol price increases have been mostly passed on to the consumer faster than price decreases in four capital cities. One can thus argue that there are a significant degree of market inefficiency and/or collusion, requiring closer government price monitoring and scrutiny.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow065349.pdf
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Bibliographic Info

Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp09-08.

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Length: 28 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:uow:depec1:wp09-08

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
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Keywords: Petrol prices; Asymmetric effects; Australia.;

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References

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  1. Chen, Li-Hsueh & Finney, Miles & Lai, Kon S., 2005. "A threshold cointegration analysis of asymmetric price transmission from crude oil to gasoline prices," Economics Letters, Elsevier, vol. 89(2), pages 233-239, November.
  2. M. Galeotti & A. Lanza & M. Manera, 2001. "Rockets and feathers revisited: an international comparison on European gasoline markets," Working Paper CRENoS 200112, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  3. Severin Borenstein & A. Colin Cameron, 1992. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," NBER Working Papers 4138, National Bureau of Economic Research, Inc.
  4. Sam Peltzman, 1998. "Prices Rise Faster Than They Fall," University of Chicago - George G. Stigler Center for Study of Economy and State 142, Chicago - Center for Study of Economy and State.
  5. James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Working Papers 1996_07, York University, Department of Economics.
  6. Godby, Rob & Lintner, Anastasia M. & Stengos, Thanasis & Wandschneider, Bo, 2000. "Testing for asymmetric pricing in the Canadian retail gasoline market," Energy Economics, Elsevier, vol. 22(3), pages 349-368, June.
  7. Barry Reilly & Robert Witt, 1996. "Petrol Price Asymmetries Revisited," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 89, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
  8. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-11, July.
  9. Stanislav Radchenko, 2004. "Oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases," Industrial Organization 0408001, EconWPA.
  10. Ronald Johnson, 2002. "Search Costs, Lags and Prices at the Pump," Review of Industrial Organization, Springer, vol. 20(1), pages 33-50, February.
  11. Kaufmann, Robert K. & Laskowski, Cheryl, 2005. "Causes for an asymmetric relation between the price of crude oil and refined petroleum products," Energy Policy, Elsevier, vol. 33(12), pages 1587-1596, August.
  12. Stephen P. A. Brown & Mine K. Yücel, 2000. "Gasoline and crude oil prices: why the asymmetry?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q3, pages 23-29.
  13. Hansen, Bruce E. & Seo, Byeongseon, 2002. "Testing for two-regime threshold cointegration in vector error-correction models," Journal of Econometrics, Elsevier, vol. 110(2), pages 293-318, October.
  14. Abbas Valadkhani & William F. Mitchell, 2002. "Assessing the Impact of Changes in Petroleum Prices on Inflation and Household Expenditures in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(2), pages 122-132.
  15. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-76, April.
  16. Al-Gudhea, Salim & Kenc, Turalay & Dibooglu, Sel, 2007. "Do retail gasoline prices rise more readily than they fall?: A threshold cointegration approach," Journal of Economics and Business, Elsevier, vol. 59(6), pages 560-574.
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Cited by:
  1. Polemis, Michail & Fotis, Panagiotis, 2011. "The gasoline Industry in European Union and the USA," MPRA Paper 35097, University Library of Munich, Germany.

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