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Theoretical explanations for asymmetric relationships between gasoline and crude oil prices with focus on the US market

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  • Afshin Honarvar

Abstract

Asymmetric movements of gasoline and crude oil prices have been the focus of many studies since 1990s. Recent volatile crude oil prices in the global market have reignited interest in the link between gasoline and crude oil prices. Asymmetry between gasoline and crude oil prices is defined as the process of non-symmetric response of gasoline prices to changes in crude oil prices. This study presents a survey of papers which address various aspects and explanations of asymmetry between gasoline and crude oil prices. The studies in this literature cover different stages of the market between retail gasoline and crude oil. Although the different studies employ different methodologies to uncover asymmetry, the reliability of some of the methods has been questioned. Several explanations are offered for asymmetry like retailer's market power, asymmetric role of inventories, consumer search costs and so on. With the exception of market power explanation, the explanations are compatible with competitive market hypothesis. The review, highlights inconsistencies between economic theories and employed models, and identifies importance of distinguishing between margin and pass-through rate in future investigation. Copyright 2009 The Author. Journal compilation 2009 Organization of the Petroleum Exporting Countries.

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  • Afshin Honarvar, 2009. "Theoretical explanations for asymmetric relationships between gasoline and crude oil prices with focus on the US market," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 33(3-4), pages 205-224, September.
  • Handle: RePEc:bla:opecrv:v:33:y:2009:i:3-4:p:205-224
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    Cited by:

    1. Bagnai, Alberto & Mongeau Ospina, Christian Alexander, 2015. "Long- and short-run price asymmetries and hysteresis in the Italian gasoline market," Energy Policy, Elsevier, vol. 78(C), pages 41-50.
    2. repec:eee:joecas:v:13:y:2016:i:c:p:89-99 is not listed on IDEAS
    3. Alberto Bagnai & Christian Alexander Mongeau Ospina, 2014. "Long- and short-run price asymmetries in the Italian energy market: the case of gasoline and heating gasoil," a/ Working Papers Series 1407, Italian Association for the Study of Economic Asymmetries, Rome (Italy).
    4. Alberto Bagnai & Christian Alexander Mongeau Ospina, 2016. "Price asymmetries in the European gasoline market," a/ Working Papers Series 1602, Italian Association for the Study of Economic Asymmetries, Rome (Italy).

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