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Testing for Asymmetric Pricing Behaviour in Irish and UK Petrol and Diesel Markets

Author

Listed:
  • Bermingham, Colin

    (Central Bank and Financial Services Authority of Ireland)

  • O’ Brien, Derry

    (Central Bank and Financial Services Authority of Ireland)

Abstract

This paper empirically tests whether Irish and UK petrol and diesel markets are characterised by asymmetric pricing behaviour. The econometric assessment uses threshold autoregressive models and a dataset of monthly refined oil and retail prices covering the period 1997 to mid-2009. A methodological note is included on the importance of the specification of the number of possible regimes. In particular, the possibility of conflicting price pressures arising from short-run dynamics in retail prices and responses to disequilibrium errors needs to be explicitly modelled. For both the Irish and UK liquid fuel markets at national levels, the paper concludes that there is no evidence to support the “rockets and feathers” hypothesis that retail prices rise faster than they fall in response to changes in oil prices. It is still possible that a lack of competition at a more local level may accommodate asymmetric pricing behaviour.

Suggested Citation

  • Bermingham, Colin & O’ Brien, Derry, 2010. "Testing for Asymmetric Pricing Behaviour in Irish and UK Petrol and Diesel Markets," Research Technical Papers 3/RT/10, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:3/rt/10
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    File URL: https://centralbank.ie/docs/default-source/publications/research-technical-papers/research-technical-paper-3rt10.pdf?sfvrsn=10
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    Citations

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    Cited by:

    1. Polemis, Michael L. & Fotis, Panagiotis N., 2014. "The taxation effect on gasoline price asymmetry nexus: Evidence from both sides of the Atlantic," Energy Policy, Elsevier, vol. 73(C), pages 225-233.
    2. Polemis, Michail & Fotis, Panagiotis, 2011. "The gasoline Industry in European Union and the USA," MPRA Paper 35097, University Library of Munich, Germany.
    3. Michael L. Polemis & Mike G. Tsionas, 2017. "Asymmetric Price Adjustment in the US Gasoline Industry: Evidence from Bayesian Threshold Dynamic Panel Data Models," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 24(1), pages 91-128, January.
    4. Rahman, Mohammad Chhiddikur, 2020. "Welfare Impact of Asymmetric Price Transmission on Bangladesh Rice Consumers," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 242248, January.
    5. O'Brien, Derry & Weymes, Laura, 2010. "The Impact of Oil Prices on Irish Inflation," Quarterly Bulletin Articles, Central Bank of Ireland, pages 66-82, July.
    6. Polemis, Michael L. & Fotis, Panagiotis N., 2013. "Do gasoline prices respond asymmetrically in the euro zone area? Evidence from cointegrated panel data analysis," Energy Policy, Elsevier, vol. 56(C), pages 425-433.
    7. Rahman, Mohammad Chhiddikur, 2018. "Welfare Impact of Asymmetric Price Transmission on Bangladesh Rice Consumers," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 251114, January.
    8. Alberto Bagnai & Christian Alexander Mongeau Ospina, 2016. "Price asymmetries in the European gasoline market," a/ Working Papers Series 1602, Italian Association for the Study of Economic Asymmetries, Rome (Italy).

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