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Inventories and upstream gasoline price dynamics

  • Kuper, Gerard H.

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.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): 1 ()
Pages: 208-214

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Handle: RePEc:eee:eneeco:v:34:y:2012:i:1:p:208-214
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  17. 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.
  18. 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.
  19. Stanislav Radchenko, 2004. "Oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases," Industrial Organization 0408001, EconWPA.
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