OIL AND PUMP PRICES: IS THERE ANY ASYMMETRY IN THE GREEK OIL DOWNSTREAM SECTOR?
Zacharias Bragoudakis
Bank of Greece
Stavros Degiannakis
Bank of Greece
George Filis
Bournemouth University
ABSTRACT
The aim of this study is to assess whether fuel prices in Greece respond asymmetrically to changes in the global oil prices. To do so, we depart from the current practice in the literature that focuses on fuel prices. Rather, we consider the mark-up of both the refineries and retailers. Even more, unlike the bulk of the existing literature, we take into consideration the whole supply chain, i.e. both the refineries and the retail fuel sector. Hence, we first assess whether the refineries’ mark-up responds asymmetrically to the global oil prices and subsequently whether the retailers’ mark-up shows an asymmetric behaviour relatively to changes in the refineries’ fuel prices. Our findings show that the Greek fuel retailers do not change their mark-up behaviour based on changes of the refined fuel price. By contrast, the asymmetric behaviour is evident in the refineries mark-up relatively to changes in the global oil prices, which is then passed through to the retailers and consumers. Finally, we convincingly show that weekly and monthly data mask any such asymmetric relationship. Thus, we maintain that unless the appropriate data frequency, fuel price transformations and the whole supply chain are considered, misleading findings could be revealed.
Keywords: Oil price shocks, fuel prices, asymmetric responses, rockets and feathers, pass-through.
JEL-classifications: C22, C32, D40, Q41
Acknowledgements: The authors would like to thank Heather Gibson for her constructive comments on a previous version of the paper. Furthermore, special thanks are owed to Markos Petroulakis and Aggelos Degiannakis from the Ministry of Economic Development for providing part of the data used in this paper. This research was conducted while George Filis was visiting Bank of Greece on the Bank’s programme of cooperation with universities. The views expressed are our own and not necessarily shared by the institutions we are affiliated with. Any errors remain our responsibility.
Correspondence:
George Filis
Bournemouth University
89 Holdenhurst Road
Executive Business Centre
BH8 8EB, Bournemouth, UK
email: gfilis@bournemouth.ac.uk