Inventories and upstream gasoline price dynamics
This paper sheds new light on the asymmetric dynamics in upstream U.S. gasoline prices. The model is based on Pindyck's inventory model of commodity price dynamics. We show that asymmetry in gasoline price dynamics is caused by changes in the net marginal convenience yield: higher costs of marketing and storage lead to rising gasoline prices, whereas a drop in these costs lowers gasoline prices. The former effect is stronger. This indicates asymmetric dynamics. We also analyze the asymmetry across the sample by analyzing recursive and rolling regressions.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ron Alquist & Lutz Kilian, 2010.
"What do we learn from the price of crude oil futures?,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 25(4), pages 539-573.
- Alquist, Ron & Kilian, Lutz, 2007. "What Do We Learn from the Price of Crude Oil Futures?," CEPR Discussion Papers 6548, C.E.P.R. Discussion Papers.
- Banerjee, Anindya & Lumsdaine, Robin L & Stock, James H, 1992.
"Recursive and Sequential Tests of the Unit-Root and Trend-Break Hypotheses: Theory and International Evidence,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 10(3), pages 271-87, July.
- Anindya Banerjee & Robin L. Lumsdaine & James H. Stock, 1990. "Recursive and Sequential Tests of the Unit Root and Trend Break Hypothesis: Theory and International Evidence," NBER Working Papers 3510, National Bureau of Economic Research, Inc.
- Engle III, Robert F., 2003.
"Risk and Volatility: Econometric Models and Financial Practice,"
Nobel Prize in Economics documents
2003-4, Nobel Prize Committee.
- Robert Engle, 2004. "Risk and Volatility: Econometric Models and Financial Practice," American Economic Review, American Economic Association, vol. 94(3), pages 405-420, June.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Chiou Wei, Song Zan & Zhu, Zhen, 2006. "Commodity convenience yield and risk premium determination: The case of the U.S. natural gas market," Energy Economics, Elsevier, vol. 28(4), pages 523-534, July.
- Stanislav Radchenko, 2004.
"Oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases,"
- Radchenko, Stanislav, 2005. "Oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases," Energy Economics, Elsevier, vol. 27(5), pages 708-730, September.
- Meyer, Jochen & von Cramon-Taubadel, Stephan, 2002.
"Asymmetric Price Transmission: A Survey,"
2002 International Congress, August 28-31, 2002, Zaragoza, Spain
24822, European Association of Agricultural Economists.
- Giliola Frey & Matteo Manera, 2007.
"Econometric Models Of Asymmetric Price Transmission,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 21(2), pages 349-415, 04.
- Matteo Manera & Giliola Frey, 2005. "Econometric Models of Asymmetric Price Transmission," Working Papers 2005.100, Fondazione Eni Enrico Mattei.
- 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.
- Severin Borenstein & A. Colin Cameron & Richard Gilbert, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 305-339.
- Gibson, Rajna & Schwartz, Eduardo S, 1990. " Stochastic Convenience Yield and the Pricing of Oil Contingent Claims," Journal of Finance, American Finance Association, vol. 45(3), pages 959-76, July.
- Tao Wu & Andrew H. McCallum, 2005. "Do oil futures prices help predict future oil prices?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec30.
- Thomas A. Knetsch, 2007.
"Forecasting the price of crude oil via convenience yield predictions,"
Journal of Forecasting,
John Wiley & Sons, Ltd., vol. 26(7), pages 527-549.
- Knetsch, Thomas A., 2006. "Forecasting the price of crude oil via convenience yield predictions," Discussion Paper Series 1: Economic Studies 2006,12, Deutsche Bundesbank, Research Centre.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
- Lance J. Bachmeier & James M. Griffin, 2003.
"New Evidence on Asymmetric Gasoline Price Responses,"
The Review of Economics and Statistics,
MIT Press, vol. 85(3), pages 772-776, August.
- Lance J. Bachmeier & James M. Griffin, . "New Evidence on Asymmetric Gasoline Price Responses," Working Papers 0208, East Carolina University, Department of Economics.
- 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.
- Litzenberger, Robert H & Rabinowitz, Nir, 1995. " Backwardation in Oil Futures Markets: Theory and Empirical Evidence," Journal of Finance, American Finance Association, vol. 50(5), pages 1517-45, December.
- Perron, P, 1988.
"The Great Crash, The Oil Price Shock And The Unit Root Hypothesis,"
338, Princeton, Department of Economics - Econometric Research Program.
- Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
- 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.
- Considine, Timothy J. & Larson, Donald F., 2001. "Uncertainty and the convenience yield in crude oil price backwardations," Energy Economics, Elsevier, vol. 23(5), pages 533-548, September.
- Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 931-955, September.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- 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.
- Galeotti, Marzio & Lanza, Alessandro & Manera, Matteo, 2003. "Rockets and feathers revisited: an international comparison on European gasoline markets," Energy Economics, Elsevier, vol. 25(2), pages 175-190, March.
- Mark W. French, 2005. "Why and when do spot prices of crude oil revert to futures price levels?," Finance and Economics Discussion Series 2005-30, Board of Governors of the Federal Reserve System (U.S.).
- Ronald Johnson, 2002. "Search Costs, Lags and Prices at the Pump," Review of Industrial Organization, Springer, vol. 20(1), pages 33-50, February.
- Cook, Steven & Holly, Sean & Turner, Paul, 1999. "The power of tests for non-linearity: the case of Granger-Lee asymmetry," Economics Letters, Elsevier, vol. 62(2), pages 155-159, February.
- Ahmet E. Kocagil, 2004. "Optionality and Daily Dynamics of Convenience Yield Behavior: An Empirical Analysis," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 27(1), pages 143-158.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:34:y:2012:i:1:p:208-214. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.