The relationship between U.S. retail gasoline and crude oil prices during the Great Recession: “Rockets and feathers” or “balloons and rocks” behavior?

Bremmer, Dale; Kesselring, Randall G.

doi:10.1016/j.eneco.2015.12.014

Cited by 33 publications

(8 citation statements)

References 23 publications

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“…However, the results in Table 6 suggest no evidence of cointegration between positive changes in crude oil prices and negative changes in petroleum prices. Hence, we confirm the evidence of cointegration among the components of petroleum and crude oil prices and this supports the findings of Granger et al (2002), Bremmer et al (2016), Mert et al (2020) and Boga (2020) that subcomponents of economic variables might exhibit some form of hidden cointegration even in the absence of explicit cointegration between the original variables. The long-run and short-run relationships between the cointegrated components can be represented in the following equations (11)…”

Section: Cointegration Testssupporting

confidence: 92%

Crude oil prices pass-through to retail petroleum product prices in Nigeria: evidence from hidden cointegration approach

Olayungbo

2021

Econ Change Restruct

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This study produces the first-ever analysis in Nigeria on the asymmetric response of petroleum product prices to international crude oil prices by employing the hidden cointegration approach on quarterly data spanning from 1973Q1 to 2020Q2. After the preliminary tests of data description, unit root analysis and cointegration test, we find that positive and negative components of both the crude oil and petroleum prices move together in the long run. The result suggests evidence of long-run asymmetry in Nigeria. The empirical findings from both the long-run and short-run results show that petroleum prices in Nigeria respond asymmetrically to changes in crude oil prices. Specifically, the outcomes from the study reveal that positive changes (increase) in crude oil prices produce a larger and stronger effect on petroleum prices than the effect of negative changes (decrease) in crude oil prices indicating evidence of an asymmetric relationship between the two prices in Nigeria. Thus, the findings confirm the existence of the rocket and feather hypothesis in the retail energy market in Nigeria. Overall, the study finds convincing evidence to support the hypothesis of "rocket and feather" in the pass-through effect of crude oil prices on petroleum prices in Nigeria. The study advocates for more government intervention in the energy market to reduce the welfare loss associated with an increase in crude oil prices on the citizens.

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Section: Cointegration Testssupporting

confidence: 92%

Crude oil prices pass-through to retail petroleum product prices in Nigeria: evidence from hidden cointegration approach

Olayungbo

2021

Econ Change Restruct

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“…In contrast, various studies could not find asymmetry or report contradictory results with respect to the size and sign of price asymmetries in gasoline markets. Some of these studies include Kirchgassner and Kubler (1992) and Assane-Otoo and Schneider (2015) for Germany; Contín-Pilart et al (2009) for Spain; Asplund et al (2000) for Sweden; Godby et al (2000) for Canada; Bachmeier and Griffin (2003), Honarvar (2009), Atil et al (2014) and Bremmer and Kesselring (2016) for the USA; Grasso and Manera (2007), Meyler (2009), Clerides (2010) and Karagiannis et al (2015) for some European countries; Bermingham and O'Brien (2011) for Ireland and the UK; Kristoufek and Lunackova (2015) and Apergis and Vouzavalis (2018) for some European countries and the USA. The existence of conflicting results shows that a consensus could not be attained concerning the rationale, size and sign of price asymmetries in the petroleum product markets.…”

Section: Introductionmentioning

confidence: 99%

The Asymmetric Effects of Crude Oil Prices and Exchange Rates on Diesel Prices for 27 European Countries

Haliloğlu

Berument

2021

Global Business Review

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Many studies have examined the asymmetric effect of US dollar-denominated crude oil prices on petroleum product prices. The ‘rockets and feathers’ argument suggests that a crude price increase raises petroleum product prices more than a corresponding decrease in crude prices lowers product prices. However, for the countries that do not use the US dollar as a medium of exchange, petroleum product prices are also affected by the exchange rates. This paper analysed the asymmetric effects of both US dollar-denominated crude oil prices and exchange rates on local currency-denominated diesel prices for 27 European countries in the short run as well as long run. The overall empirical evidence suggests that, in the short run, diesel prices react more to crude oil price increases than to a decrease, parallel to the ‘rockets and feathers’ argument. However, contrary to that argument, the long-run adjustment is the opposite. As for exchange rate shocks, again the ‘rockets and feathers’ argument holds and diesel prices respond more to exchange rate depreciation than appreciation in the short and long run.

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“…This "rocket-feather-relationship" was first documented by Bacon (1991), and later confirmed by Galeotti et al (2003), and again by Verlinda (2008). Bremmer and Kesselring (2016) have recently added to this by checking whether falling cost prices during the global economic crisis in the thirties of the last century led to a contrary trend (known as "balloons and rocks"). Price cuts are thus a delayed response to falling input prices.…”

Section: Introductionmentioning

confidence: 84%

Why Abandon the Paradise? Stations’ Incentives to Reduce Gasoline Prices at First

Wein

2021

J Ind Compet Trade

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The German petrol station market is characterized by strong intraday price cycles, which probably correspond to the well-known Edgeworth cycles. The prices go up strongly in the late evening or in the middle of the night, fall relatively heavily in the early morning, and then go up and down several times in the course of the day. Locally, the analysis is limited to the 26 petrol stations that plausibly form a common market in the Lueneburg region. This paper picks out the specific sequence in which, after generally rising prices during the day, a single supplier is the first to reverse the price trend and lower its price. For this purpose, current price reports are used to define the price reduction event down to the second, and to show only the valid prices of competitors prior to the event. All German petrol stations have to report price changes to the Bundeskartellamt's Market Transparency Department. Tankerkoenig then publishes the full reports. This results in one panel observation for each price reduction event. Out of nearly 300,000 price observations, just over 10,000 panel observations result. Fixed-effect logit estimates are used to test whether the theoretically and economically significant price differences of the Edgeworth cycles explain the behavior of the price cutters, or whether market structure factors, such as brand affiliation/independence of the petrol station, service offerings, or location characteristics predict price-cutting behavior. The novel recording of the price dynamics in the petrol station market by using the accurate petrol station price data to the second indicates promising research of extensive price data and avoids the enormous loss of information in the previously common calculation of average prices at certain times.

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The relationship between U.S. retail gasoline and crude oil prices during the Great Recession: “Rockets and feathers” or “balloons and rocks” behavior?

Cited by 33 publications

References 23 publications

Crude oil prices pass-through to retail petroleum product prices in Nigeria: evidence from hidden cointegration approach

Crude oil prices pass-through to retail petroleum product prices in Nigeria: evidence from hidden cointegration approach

The Asymmetric Effects of Crude Oil Prices and Exchange Rates on Diesel Prices for 27 European Countries

Why Abandon the Paradise? Stations’ Incentives to Reduce Gasoline Prices at First

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