New Evidence on Asymmetric Gasoline Price Responses

Lance Bachmeier and James M. Griffin
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James M. Griffin: George Bush School, Texas A&M University

The Review of Economics and Statistics, 2003, vol. 85, issue 3, 772-776

Abstract: In a 1997 paper, Borenstein, Cameron, and Gilbert (BCG) claim that gasoline prices rise quickly following an increase in the price of crude oil, but fall slowly following a decrease. This note estimates an error-correction model with daily spot gasoline and crude-oil price data over the period 1985-1998 and finds no evidence of asymmetry in wholesale gasoline prices. The sources of the difference in results are twofold. First, we use the standard Engle-Granger two-step estimation procedure, whereas BCG used a nonstandard estimation methodology. Second, even using BCG's nonstandard specification, the use of daily rather than weekly data yields little evidence of price asymmetry. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2003
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