Asymmetric pricing of diesel at its source

Abbas Valadkhani, Russell Smyth and Farshid Vahid

Energy Economics, 2015, vol. 52, issue PA, 183-194

Abstract: Competitive diesel pricing can yield tangible benefits to truck drivers, fleet operators and farmers. The ability, and willingness, of wholesale distributors to asymmetrically pass on changes in diesel costs to consumers can adversely distort the market. Existing studies for Australia have focused on petrol (gasoil) prices, while there has been no testing for asymmetry in diesel prices. We test for rocket and feather effects in Australian wholesale diesel prices at their source. We find that in all seven seaport cities, when the price of oil goes up, diesel prices shoot up like a rocket and when the price of oil decreases, diesel prices fall like a feather. The asymmetric responses are more noticeable when oil prices are rising than falling. Results support the view that suppliers adopt or coordinate almost the same asymmetric pricing behaviour before distributing diesel among retailers.

Keywords: Diesel pricing; Wholesale; Asymmetry; Australia (search for similar items in EconPapers)
JEL-codes: D43 Q41 Q43 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:52:y:2015:i:pa:p:183-194

DOI: 10.1016/j.eneco.2015.10.010

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