The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data

Posted by D. Daniel Sokol

Erwan Gautiery (University of Nantes-LEMNA and Banque de France) and Ronan Le Saou (CREST-ENSAE and Ecole Polytechnique) explore The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data.

ABSTRACT: Using millions of individual gasoline prices collected at a daily frequency, we examine the speed at which market refined oil prices are transmitted to consumer liquid fuel prices. We find that on average gasoline prices are modified once a week and the distribution of price changes displays a M-shape as predicted by a menu-cost model. Using a reduced form state-dependent pricing model with time-varying random thresholds, we find that the degree of pass through of wholesale prices to retail gasoline prices is on average 0.77 for diesel and 0.67 for petrol. The duration for a shock to be fully transmitted into prices is about 10 days. There is no significant asymmetry in the transmission of wholesale price to retail prices.