PAIN AT THE PUMP: IS THERE AN ASYMMETRIC INFLUENCE OF OIL VOLATILITY ON GASOLINE VOLATILITY IN FRANCE?

Authors

  • SOFIANE ABOURA Université de Paris-Dauphine, France

DOI:

https://doi.org/10.15173/esr.v21i2.2765

Keywords:

Gasoline, Crude oil, Volatility, Asymmetry, Correlation, Taxation effect

Abstract

We investigate, for the first time, the relationship between gasoline volatility and crude oil volatility. We aim to examine if the so-called asymmetric relationship between gasoline and crude oil prices holds for volatility. The approach employed is based on the asymmetric dynamic conditional correlation model as applied to the US WTI oil volatility and the French Super Carburant 95 gasoline volatility from 1990 to 2014.

The results reveal that gasoline volatility tends to be overreactive to changes in crude oil volatility. Moreover, it appears that the government taxation policy might amplify the gasoline volatility

References

REFERENCES

Audenis, C., Biscourp, P. and Riedinger, N., 2002. Le prix des carburants est plus sensible a une hausse qu’a une baisse du brut, Economie et Statistique, 359, 149-165.

Bacon, R.W., 1991. Rockets and feathers: the asymmetric speed of adjustment of UK. retail gasoline prices to cost changes, Energy Economics, 13, 211-18.

Balabanoff, S., 1993. The composite barrel of retail prices and its relationship to crude oil prices, OPEC Review, 17, 421-49.

Balke, N.S., Brown, S.P., and Yücel, M.K., 1998. Crude oil and gasoline prices: An asymmetric relationship? , Federal Reserve Bank of Dallas Economic Review, First Quarter, 2-11.
Bollerslev, T. 1990. Modelling the coherence in short-run nominal exchange rates: A multivariate generalized ARCH model, Review of Economics and Statistics, 72, 498-505.

Borenstein, S., Cameron, C., and Gilbert, R., 1997. Do gasoline prices respond asymmetrically to crude oil prices?, Quarterly Journal of Economics, 112, 305-39.
Brown, S.P., and Yucel, M.K., 2000. Gasoline and crude oil prices: why the asymmetry? Federal Reserve Bank of Dallas Economic review, third quarter, 23-29.

Cappiello, L., Engle, R. and Sheppard, K., 2006. Asymmetric dynamics in the correlations of global equity and bond returns, Journal of Financial Econometrics, 4, 537-572.

Clerides S., 2010. Retail fuel price response to oil price shocks in EU countries, Cyprus Economic Policy Review, 4, 25-45.

Coady, D., J. A. del Granado, L. Eyraud, H. Jin, V. Thakoor, A. Tuladhar, and L. Nemeth, 2012. Automatic fuel pricing mechanisms with price smoothing: Design, implementation, and fiscal implications, working paper, IMF.

Davoust R., 2008. Gasoline and diesel prices and taxes in industrialized countries, working paper, IFRI Fondation.

Engle, R., 2002. Dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroskedasticity models, Journal of Business and Economic Statistics, 20, 339-350.

Frey, G. and Manera, M., 2007. Econometric models of asymmetric price transmission, Journal of Economic Surveys, 21, 349-415.

Galeotti, M., Lanza, A., and Manera, M., 2003. Rockets and feathers revisited: an international comparison on European gasoline markets, Energy Economics 25,175-90.

Grasso, M., and Manera, M., 2007. Asymmetric correction models for the oil-gasoline price relationship, Energy Policy 35, 156-77.

Goldberg, P.K., and R., Hellerstein, 2011. How rigid are producer prices?, working paper, Federal Reserve Bank of New York.

Karrenbock, J.D., 1991. The behavior of retail gasoline prices: Symmetric or not? Federal Reserve Bank of St. Louis Review, July/August, 19-29

Lamotte O., Porcher T., Schalck C., and Silvestre S., 2013. Asymmetric gasoline price responses in France, Applied Economics Letters, 20, 457-461.

Peltzman, S., 2000. Prices rise faster than they fall, Journal of Political Economy 108, 466-502.

Rao, B., and Rao, G., 2008. Are US gasoline price adjustments asymmetric? , Applied Economics Letters, 15, 443-447.

Silva, F., Batista, M., and Elias, N., 2013. Fuel price transmission mechanisms in Portugal, Applied Economics Letters, 20, 72-75.

Smith, J.L., 2009. World oil: market or mayhem? , Journal of Economic Perspectives 23, 145-64.

Tse, Y., and Tsui., A.K. 2002. A multivariate generalized autoregressive conditional heteroskedasticity model with time-varying correlations, Journal of Business and Economic Statistics, 20, 351-362.

Downloads

Published

2015-11-19

Issue

Vol. 21 No. 2 (2014)

Section

Articles

License

Rights for Authors

As further described in our submission agreement (the Submission Agreement), in consideration for publication of the article, the authors assign to Energy Studies Review all copyright in the article, subject to the expansive personal--use exceptions described below.

Attribution and Usage Policies

Reproduction, posting, transmission or other distribution or use of the article or any material therein, in any medium as permitted by a personal-use exemption or by written agreement of Energy Studies Review, requires credit to Energy Studies Review as copyright holder (e.g., Energy Studies Review © 2014).

Personal-use Exceptions

The following uses are always permitted to the author(s) and do not require further permission from DigitalCommons@McMaster provided the author does not alter the format or content of the articles, including the copyright notification:

  • Storage and back-up of the article on the author's computer(s) and digital media (e.g., diskettes, back-up servers, Zip disks, etc.), provided that the article stored on these computers and media is not readily accessible by persons other than the author(s);
  • Posting of the article on the author(s) personal website, provided that the website is non-commercial;
  • Posting of the article on the internet as part of a non-commercial open access institutional repository or other non-commercial open access publication site affiliated with the author(s)'s place of employment (e.g., a Phrenology professor at the University of Southern North Dakota can have her article appear in the University of Southern North Dakota's Department of Phrenology online publication series); and
  • Posting of the article on a non-commercial course website for a course being taught by the author at the university or college employing the author.

People seeking an exception, or who have questions about use, should contact the editors.