Are Slovak Retail Gasoline and Diesel Price Reactions on Crude Oil Changes Asymmetric?

• Main Authors: Karol Szomolányi, Martin Lukáčik, Adriana Lukáčiková
• Format: Article
• Language: English
• Published: Czech Statistical Office 2020-06-01
• Series: Statistika: Statistics and Economy Journal
• Subjects: gasoline and diesel retail prices; crude oil prices; irreversible model; co-integration; asymmetries between the price of crude oil and the retail fuel
• Online Access: https://www.czso.cz/documents/10180/125507863/320197_20_138_Szomol%C3%A1nyi.pdf/c7ceb473-e37f-454c-a356-00ae709a48d9?version=1.0

The paper explains why the Slovak retail gasoline and diesel prices rise more rapidly when the price of crude oil increases and fall slowly when the price of crude oil decreases. The weekly data of Slovak retail gasoline and diesel prices and European Brent oil prices since the first week of 2009 till the second week of 2019 are used. The error correction model with irreversible behaviour of explanatory variables is specified to test asymmetric response of retail gasoline and diesel prices on changes in crude oil prices. By our assumption of linked gasoline and diesel markets, we also adopt a common co-integration relationship. Consequently, the vector error correction model is included in the analysis. An expected asymmetry in the retail fuel price reactions on crude oil changes is rejected. Our results may be informative for the future research in Slovak business cycles and in market structure of retail gasoline and diesel sellers.