Abstract
Fuel prices and the pronounced fluctuations in the international oil market are among the most widely discussed topics worldwide. Recent international developments, including energy crises, have resulted in a substantial surge in global oil prices, leading to price increases across all countries and in all petroleum products. This paper investigates the correlation between international oil prices and refining costs in Greece. More specifically, this study focuses on how rapidly refinery prices respond to potential increases or decreases in the international oil price, commonly known as the ’Rockets and Feathers’ phenomenon. The investigation assesses the reaction of diesel and gasoline refinery prices to fluctuations in the international oil price and explores the potential presence of asymmetry. The econometric model employed is based on an asymmetric error correction model, utilizing weekly data spanning from 2013 to 2022 for Greece. According to our findings, both diesel and 95-octane gasoline prices exhibit an asymmetric response to international oil prices. Notably, refinery prices react more promptly to price increases than to decreases in the global oil price. This study holds particular significance, as this delay is reflected in final retail prices, indicating the possible existence of pricing asymmetries. Additionally, the issue of oil purchase contracts arises, which guarantee a fixed price regardless of the prevailing international oil price at the time and, consequently, do not justify such fluctuations in refinery prices. These findings could prove valuable for competition policy within Greece’s vertical oil market.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.