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Pump Prices and Oil Prices: A Tale of Two Directions

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  • Nodir Adilov
  • Hedayeh Samavati

Abstract

It has been argued that retail gasoline prices adjust more quickly to crude oil price increases than to price decreases. We investigate this issue using the statewide data on weekly retail gasoline prices in the United States between January 2000 and June 2007. Our analysis does not confirm the prediction that gasoline prices adjust more quickly to price increases in crude oil prices. On the contrary, the results suggest that in some geographic areas gasoline prices could change faster when crude oil prices decrease. These findings suggest that a national or a one size fits all energy policy for the United States may be misguided. Copyright International Atlantic Economic Society 2009

Suggested Citation

  • Nodir Adilov & Hedayeh Samavati, 2009. "Pump Prices and Oil Prices: A Tale of Two Directions," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(1), pages 51-64, March.
    • Handle: RePEc:kap:atlecj:v:37:y:2009:i:1:p:51-64
    DOI: 10.1007/s11293-008-9152-8
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    References listed on IDEAS

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    1. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
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    3. Ronald Johnson, 2002. "Search Costs, Lags and Prices at the Pump," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(1), pages 33-50, February.
    4. 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.
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    6. 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.
    7. Severin Borenstein & A. Colin Cameron & Richard Gilbert, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 305-339.
    8. 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.
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    Cited by:

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    2. Holmes, Mark J. & Otero, Jesús & Panagiotidis, Theodore, 2013. "On the dynamics of gasoline market integration in the United States: Evidence from a pair-wise approach," Energy Economics, Elsevier, vol. 36(C), pages 503-510.

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    More about this item

    Keywords

    Gasoline markets; Price adjustment; Price response; Crude oil prices; D00; D21; L10; L60;
    All these keywords.

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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