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Market structure and price adjustment in the U.S. wholesale gasoline markets

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  • Oladunjoye, Olusegun

Abstract

The issue of sticky prices in U.S. wholesale gasoline market is re-examined allowing for the effect of market structure due to increased market concentration caused by mergers, acquisitions and joint ventures which started in the late 1990s in the U.S. oil industry. I investigate the effects of market structure on the pattern of price adjustment based on the notion that increased market concentration leads to downward price stickiness and asymmetric short run price adjustment in the transmission of crude price changes to wholesale gasoline price. I find that market concentration has an insignificant asymmetric effect on the speed of price adjustment but a significant asymmetric effect on short run price adjustments in the response of wholesale gasoline prices to crude price shocks in three U.S. wholesale markets. Furthermore, the signs on the coefficients of market concentration effects on price dynamics in the models support the assertion that increased market concentration leads to downward price stickiness in only one of the three markets examined. Overall, the results indicate that market structure does not have a strong effect on the dynamics of price adjustment.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 30 (2008)
Issue (Month): 3 (May)
Pages: 937-961

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Handle: RePEc:eee:eneeco:v:30:y:2008:i:3:p:937-961
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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Cited by:

  1. Kendix, Michael & Walls, W.D., 2010. "Oil industry consolidation and refined product prices: Evidence from US wholesale gasoline terminals," Energy Policy, Elsevier, vol. 38(7), pages 3498-3507, July.
  2. Gupta, Kartick, 2016. "Oil price shocks, competition, and oil & gas stock returns — Global evidence," Energy Economics, Elsevier, vol. 57(C), pages 140-153.
  3. Kristoufek, Ladislav & Lunackova, Petra, 2015. "Rockets and feathers meet Joseph: Reinvestigating the oil–gasoline asymmetry on the international markets," Energy Economics, Elsevier, vol. 49(C), pages 1-8.
  4. 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.
  5. Du, Xiaodong & Hayes, Dermot J., 2008. "Impact of Ethanol Production on U.S. and Regional Gasoline Prices and On the Profitability of U.S. Oil Refinery Industry," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6353, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Du, Xiaodong & Hayes, Dermot J., 2009. "The impact of ethanol production on US and regional gasoline markets," Energy Policy, Elsevier, vol. 37(8), pages 3227-3234, August.
  7. 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.
  8. Du, Xiaodong & Hayes, Dermot J., 2009. "The impact of ethanol production on US and regional gasoline markets," Energy Policy, Elsevier, vol. 37(8), pages 3227-3234, August.
  9. Pal, Debdatta & Mitra, Subrata K., 2016. "Asymmetric oil product pricing in India: Evidence from a multiple threshold nonlinear ARDL model," Economic Modelling, Elsevier, vol. 59(C), pages 314-328.
  10. Meyler, Aidan, 2009. "The pass through of oil prices into euro area consumer liquid fuel prices in an environment of high and volatile oil prices," Energy Economics, Elsevier, vol. 31(6), pages 867-881, November.
  11. Perdiguero-García, Jordi, 2013. "Symmetric or asymmetric oil prices? A meta-analysis approach," Energy Policy, Elsevier, vol. 57(C), pages 389-397.
  12. Jordi Perdiguero-García, 2010. "“Symmetric or asymmetric gasoline prices? A metaanalysis approach”," IREA Working Papers 201013, University of Barcelona, Research Institute of Applied Economics, revised Nov 2010.

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