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Testing for Asymmetric Pricing Behaviour in Irish and UK Petrol and Diesel Markets

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Listed:
  • Colin Bermingham
  • Derry O'Brien

Abstract

This paper empirically tests whether Irish and UK petrol and diesel markets are characterised by asymmetric pricing behaviour. The econometric assessment uses threshold autoregressive models and a dataset of monthly refined oil and retail prices covering the period 1994 to mid-2009. In addition to providing an appraisal of the existence of asymmetry in the Irish and UK markets, the paper provides an important methodological contribution. Tests of asymmetry in the literature normally partition the sample into periods of falling and rising international oil prices. This fails to account for price pressures coming from the equilibrium error of the cointegrating relationship. In particular, the possibility of conflicting price pressures arising from short-run dynamics in retail prices and responses to disequilibrium errors needs to be explicitly modelled. We take this issue into account in an econometric model and we highlight the importance of this distinction. In terms of the asymmetric behaviour of these markets, the paper finds no evidence to support the "rockets and feathers" hypothesis that prices rise faster than they fall in response to changes in the value of international oil prices.

Suggested Citation

  • Colin Bermingham & Derry O'Brien, 2011. "Testing for Asymmetric Pricing Behaviour in Irish and UK Petrol and Diesel Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-26.
  • Handle: RePEc:aen:journl:32-3-a01
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    Citations

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    Cited by:

    1. Jozef Baruník, Evzen Kocenda and Lukáa Vácha, 2015. "Volatility Spillovers Across Petroleum Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    2. Yufeng Chen & Guobin Huang & Lihua Ma, 2017. "Rockets and Feathers: The Asymmetric Effect between China’s Refined Oil Prices and International Crude Oil Prices," Sustainability, MDPI, Open Access Journal, vol. 9(3), pages 1-19, March.
    3. Brewer, Jedidiah & Nelson, David M. & Overstreet, George, 2014. "The economic significance of gasoline wholesale price volatility to retailers," Energy Economics, Elsevier, vol. 43(C), pages 274-283.
    4. Kaukin, A. & Filicheva, E. & Freinkman, L., 2016. "Determinants of Russian Retail Petroleum Prices," Journal of the New Economic Association, New Economic Association, vol. 30(2), pages 34-59.
    5. Chua, Chew Lian & De Silva, Chamaka & Suardi, Sandy, 2017. "Do petrol prices increase faster than they fall in market disequilibria?," Energy Economics, Elsevier, vol. 61(C), pages 135-146.
    6. Karagiannis, Stelios & Panagopoulos, Yannis & Vlamis, Prodromos, 2015. "Are unleaded gasoline and diesel price adjustments symmetric? A comparison of the four largest EU retail fuel markets," Economic Modelling, Elsevier, vol. 48(C), pages 281-291.
    7. Perdiguero-García, Jordi, 2013. "Symmetric or asymmetric oil prices? A meta-analysis approach," Energy Policy, Elsevier, vol. 57(C), pages 389-397.
    8. repec:eee:eneeco:v:65:y:2017:i:c:p:42-49 is not listed on IDEAS
    9. Katarzyna Leszkiewicz-Kędzior & Aleksander Welfe, 2014. "Asymmetric Price Adjustments in the Fuel Market," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 6(2), pages 105-127, June.
    10. repec:eee:juipol:v:45:y:2017:i:c:p:76-83 is not listed on IDEAS
    11. Valadkhani, Abbas & Smyth, Russell & Vahid, Farshid, 2015. "Asymmetric pricing of diesel at its source," Energy Economics, Elsevier, vol. 52(PA), pages 183-194.
    12. repec:eee:enepol:v:114:y:2018:i:c:p:519-528 is not listed on IDEAS
    13. da Silva, André Suriane & Vasconcelos, Cláudio Roberto Fóffano & Vasconcelos, Silvinha Pinto & de Mattos, Rogério Silva, 2014. "Symmetric transmission of prices in the retail gasoline market in Brazil," Energy Economics, Elsevier, vol. 43(C), pages 11-21.
    14. repec:agr:journl:v:4(605):y:2015:i:4(605):p:33-44 is not listed on IDEAS
    15. Iuliana ZLATCU & Matei KUBINSCHI & Dinu BARNEA, 2015. "Fuel Price Volatility and Asymmetric Transmission of Crude Oil Price Changes to Fuel Prices," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(605), W), pages 33-44, Winter.

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    JEL classification:

    • F0 - International Economics - - General

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