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Anticipated and unanticipated effects of crude oil prices and gasoline inventory changes on gasoline prices

  • Radchenko, Stanislav
  • Shapiro, Dmitry

This paper examines the effect of anticipated and unanticipated changes in oil prices and gasoline inventory on US gasoline prices. We estimate empirical responses to anticipated and unanticipated changes in oil prices and gasoline inventory and show that gasoline price adjustments are faster and stronger for anticipated changes in oil prices and inventory levels than for unanticipated changes. Furthermore, this difference is statistically significant. We use these findings to evaluate the cost of adjustment hypothesis suggested by Borenstein and Shephard (2002). We also find that there is an asymmetry in the effect of gasoline inventory on gasoline and oil prices. This finding complements a well-known result that positive and negative changes in oil prices have asymmetric effect on gasoline prices.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 5 (September)
Pages: 758-769

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:5:p:758-769
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  9. Radchenko, Stanislav, 2005. "Lags in the response of gasoline prices to changes in crude oil prices: The role of short-term and long-term shocks," Energy Economics, Elsevier, vol. 27(4), pages 573-602, July.
  10. Severin Borenstein & Andrea Shepard, 1996. "Sticky Prices, Inventories, and Market Power in Wholesale Gasoline Markets," NBER Working Papers 5468, National Bureau of Economic Research, Inc.
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  16. George Hall & John Rust, 2007. "The (S,s) Policy is an Optimal Trading Strategy in a Class of Commodity Price Speculation Problems," Economic Theory, Springer, vol. 30(3), pages 515-538, March.
  17. Giliola Frey & Matteo Manera, 2007. "Econometric Models Of Asymmetric Price Transmission," Journal of Economic Surveys, Wiley Blackwell, vol. 21(2), pages 349-415, 04.
  18. Ronald Johnson, 2002. "Search Costs, Lags and Prices at the Pump," Review of Industrial Organization, Springer, vol. 20(1), pages 33-50, February.
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