Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, August 23, 2011

Price Pass-Through in US Gasoline Markets

Posted by D. Daniel Sokol

Benjamin F. Blair, Mississippi State University - College of Business and Phillip A. Mixon, Troy University discuss Price Pass-Through in US Gasoline Markets.

ABSTRACT:Using an error-correction model in a seemingly unrelated regression framework, we examine regional differences in the price pass-through from crude oil spot prices to retail gasoline pump prices. We show that regional differences do exist both in the short run and long run adjustment process. Depending on the region, a $1 per barrel change in crude oil prices results in a change in retail gasoline pump prices somewhere between 2.52¢ and 2.65¢. We examine the presence of the rockets and feathers phenomenon using both a single period coefficient tests and multiple period impulse response functions.

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