Asymmetric responses in the timing, and magnitude, of changes in Australian monthly petrol prices to daily oil price changes

Abbas Valadkhani, Russell Smyth

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

Abstract

This article investigates whether uncompetitive pricing tactics are being employed in the retail petrol market in Australia through examining the effect of a change in daily oil prices on monthly petrol prices. To do so, we incorporate asymmetry into the coefficients of a normalised beta weighting function within an Asymmetric Mixed Data Sampling (AMIDAS) framework. This enables us to examine both the timing, and the lagged marginal effects, of a change in retail petrol prices in response to a change in the oil price. We find evidence of asymmetries in both the timing, and magnitude, of retail petrol prices to a change in the oil price. Specifically, we find that while price falls are slowly and symmetrically passed onto consumers, price increases are more delayed, but higher in intensity over time. Depending on the capital city, when retailers eventually do increase petrol prices, in response to an oil price rise with delay, the price rise is between 2.1 and 3.4 times more than when retailers reduce petrol prices in response to a fall in the price of oil. This finding is consistent with retailers delaying substantial petrol price rises in order to mask the existence of uncompetitive practices.

Original languageEnglish
Pages (from-to)89-100
Number of pages12
JournalEnergy Economics
Volume69
DOIs
Publication statusPublished - 1 Jan 2018

Keywords

  • Australia
  • Mixed data sampling
  • Petrol price
  • Retail

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