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

  • Stanislav Radchenko

    (Department of Economics, University of North Carolina at Charlotte)

This paper proposes a method of distinguishing between the effect of anticipated and unanticipated changes in oil prices and oil inventories on the US gasoline prices. I show that gasoline price adjustments are faster and stronger for anticipated changes in oil prices and inventory levels than for unanticipated changes. The dynamics of the gasoline price response depends on the relative importance of anticipated and unanticipated changes in oil prices and oil inventories in the model. In all versions of the adjustment model, the response of gasoline prices to unanticipated oil price changes is lagged and incomplete. In versions of the model where anticipated oil price changes are relatively important, the response of gasoline prices to anticipated changes in oil prices is immediate and large. As anticipated oil price changes become less important, the response of gasoline prices to anticipated oil price changes becomes muted and delayed.

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File URL: http://econwpa.repec.org/eps/mic/papers/0406/0406001.pdf
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Paper provided by EconWPA in its series Microeconomics with number 0406001.

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Length: 39 pages
Date of creation: 01 Jun 2004
Date of revision:
Handle: RePEc:wpa:wuwpmi:0406001
Note: Type of Document - pdf; pages: 39
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Pindyck, Robert S., 1990. "Inventories and the short-run dynamics of commodity prices," Working papers 3133-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Borenstein, Severin & Cameron, A Colin & Gilbert, Richard, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 305-39, February.
  3. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
  4. Raymond, Jennie E & Rich, Robert W, 1997. "Oil and the Macroeconomy: A Markov State-Switching Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 193-213, May.
  5. Stanislav Radchenko, 2004. "Lags in the response of gasoline prices to changes in crude oil," Econometrics 0406001, EconWPA.
  6. Godby, Rob & Lintner, Anastasia M. & Stengos, Thanasis & Wandschneider, Bo, 2000. "Testing for asymmetric pricing in the Canadian retail gasoline market," Energy Economics, Elsevier, vol. 22(3), pages 349-368, June.
  7. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
  8. Severin Borenstein & Andrea Shepard, 2002. "Sticky Prices, Inventories, and Market Power in Wholesale Gasoline Markets," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 116-139, Spring.
  9. Nathan S. Balke & Stephen P. A. Brown & Mine Yücel, 1999. "Oil price shocks and the U.S. economy: where does the asymmetry originate?," Working Papers 9911, Federal Reserve Bank of Dallas.
  10. Bacon, Robert W., 1991. "Rockets and feathers: the asymmetric speed of adjustment of UK retail gasoline prices to cost changes," Energy Economics, Elsevier, vol. 13(3), pages 211-218, July.
  11. Robert S. Pindyck, 2001. "The Dynamics of Commodity Spot and Futures Markets: A Primer," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-30.
  12. 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.
  13. 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.
  14. Barry Reilly & Robert Witt, 1996. "Petrol Price Asymmetries Revisited," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 89, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
  15. Lutz Kilian, 1998. "Small-Sample Confidence Intervals For Impulse Response Functions," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 218-230, May.
  16. Hans-Martin Krolzig & Michael P. Clements, 2002. "Can oil shocks explain asymmetries in the US Business Cycle?," Empirical Economics, Springer, vol. 27(2), pages 185-204.
  17. Nathan S. Balke & Stephen P. A. Brown & Mine Yücel, 1998. "Crude oil and gasoline prices: an asymmetric relationship?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q 1, pages 2-11.
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