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Vol. 73, No. 4
Posted 1991-07-01

The Behavior of Retail Gasoline Prices: Symmetric or Not?

by Jeffrey D. Karrenbrock

Jeffrey D. Karrenbrock examines the behavior of retail gasoline prices. As the author first points out, oil producers and refiners are not the only entities on the supply side who influence gasoline prices. Because retailers also play a role in determining the retail price of gasoline, they could be equally responsible for any price anomalies that occur in the industry—including the popular belief that gasoline prices are increased more and reduced less in response to rises and falls in the underlying price of crude oil. Karrenbrock’s analysis finds little evidence to support this "price-gouging” hypothesis, however. He finds that retail gasoline prices respond symmetrically to wholesale price increases and decreases in both the timing and the amount of price pass-through. Karrenbrock does note that the retail price adjustment lags are shorter for a wholesale price increase than they are for a decrease.



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