Relation of Retail Gasoline and Diesel Prices in Croatia with Crude Oil Prices on World Markets

Authors

Keywords:

asymmetry, retail gasoline prices, error correction model, threshold autoregressive cointegration, linear-exponential adjustment cost function, generalised method of moments, Croatia

Abstract

According to many studies, the transmission of oil prices to retail fuel prices is asymmetric. Fuel prices react faster if oil prices rise and more slowly if oil prices fall. We use the simple and dynamic asymmetry models, error correction models, threshold autoregressive cointegration, and an approach based on the adjustment cost function in the linear-exponential form to verify the hypothesis of asymmetric reactions of gasoline and diesel prices in Croatia. The analysis uses a weekly time series of Croatian fuel prices obtained from the European Commission Weekly Oil Bulletin and BRENT oil prices from the US Energy Information Administration. Different standard econometric procedures lead to different results. Nevertheless, the approach based on the linear-exponential lost function confirmed the price asymmetries in the Croatian market.

Author Biographies

Karol Szomolányi, University of Economics in Bratislava, Slovakia

Karol Szomolányi was born in Bojnice in the Slovak Republic (formerly Czechoslovakia) in 1976. He is an associated operations research and econometrics professor at the University of Economics in Bratislava, Faculty of Economic Informatics, Department of Operations Research and Econometrics. He is a member of the Slovak Society for Operations Research. He deals with macroeconomic analysis and econometrics. His areas of interest are accurate business cycle models and dynamic stochastic macroeconomic models and their use for developing countries of Eastern Europe. The author can be contacted at karol.szomolanyi@euba.sk.

Martin Lukáčik, University of Economics in Bratislava, Slovakia

Martin Lukáčik was born in Žilina in the Slovak Republic (formerly Czechoslovakia) in 1974. He is an associated operations research and econometrics professor at the University of Economics in Bratislava, Faculty of Economic Informatics, Department of Operations Research and Econometrics. He is a president of the Slovak Society for Operations Research. He deals with the econometric methods in macroeconomic framework and time series econometrics. His areas of interest are VAR models used in macroeconomics and forecasting methods. The author can be contacted at martin.lukacik@euba.sk

Adriana Lukáčiková, University of Economics in Bratislava, Slovakia

Adriana Lukáčiková was born in Gelnica in the Slovak Republic (formerly Czechoslovakia) in 1971. She is an assistant professor of operations research and econometrics at the University of Economics in Bratislava, Faculty of Economic Informatics, Department of Operations Research and Econometrics. She is a member of the Slovak Society for Operations Research. She deals with the computable general equilibrium models and econometrics. Her area of interest is the econometric modelling of the national economy. The author can be contacted at adriana.lukacikova@euba.sk

References

Apergis, N., & Vouzavalis, G. (2018). Asymmetric pass through of oil prices to gasoline prices: Evidence from a new country sample. Energy Policy, 114, 519-528. https://doi.org/10.1016/j.enpol.2017.12.046

Bacon, R. W. (1991). Rockets and feathers: The asymmetric speed of adjustment of UK retail gasoline prices to cost changes. Energy Economics, 13(3), 211-218. https://doi.org/10.1016/0140-9883(91)90022-R

Bragoudakis, Z., Degiannakis, S., & Filis, G. (2020). Oil and pump prices: Testing their asymmetric relationship in a robust way. Energy Economics, 88, 104755. https://doi.org/10.1016/j.eneco.2020.104755

Bragoudakis, Z., & Sideris, D. (2021). Asymmetric price adjustment and the effects of structural reforms and low demand in the gasoline market: The case of Greece. Journal of Applied Economics, 24(1), 504–522. https://doi.org/10.1080/15140326.2021.1922188

Čipčić, M. L. (2021). The Impact of Oil Prices on Petroleum Product Prices in Central East European Markets. Proceedings of 10th International Scientific Symposium Region Entrepreneurship and Development, 174-188.

Deltas, G., & Polemis, M. (2020). Estimating retail gasoline price dynamics: The effects of sample characteristics and research design. Energy Economics, 92, 104976. https://doi.org/10.1016/j.eneco.2020.104976

Enders, W., & Granger, C. W. J. (1998). Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates. Journal of Business & Economic Statistics, 16(3), Article 3. https://doi.org/10.2307/1392506

Enders, W., & Siklos, P. L. (2001). Cointegration and Threshold Adjustment. Journal of Business & Economic Statistics, 19(2), Article 2. https://doi.org/10.1198/073500101316970395

Engle, R. F., & Granger, C. W. J. (1987). Cointegration and Error Correction: Representation, Estimation, and Testing. Econometrica, 55(2), Article 2. https://doi.org/10.2307/1913236

Genakos, C., & Pagliero, M. (2022). Competition and Pass-Through: Evidence from Isolated Markets. American Economic Journal: Applied Economics, 14(4), 35-57. https://doi.org/10.1257/app.20200863

Granger, C. W. J., & Lee, T. H. (1989). Investigation of production, sales and inventory relationships using multicointegration and non-symmetric error correction models. Journal of Applied Econometrics, 4(S1), 145-159. https://doi.org/10.1002/jae.3950040508

Karrenbrock, J. D. (1991). The Behaviour of Retail Gasoline Prices: Symmetric or Not? Federal Reserve Bank of St. Louis Review, 73(4), 19-29.

Lanza, A. (1991). Speed of Adjustment and Market Structure: A Study of the Gasoline Market in Germany. The Oxford Institute for Energy.

Newey, W. K., & West, K. D. (1987). A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix. Econometrica, 55(3), 703-708. https://doi.org/10.2307/1913610

Szomolányi, K., Lukáčik, M., & Lukáčiková, A. (2020). Asymmetric Retail Gasoline and Diesel Price Reactions in Slovak Market. Ekonomický časopis, 68(2), 115 133.

Szomolányi, K., Lukáčik, M., & Lukáčiková, A. (2022). Asymmetric Reactions of Retail Gasoline Prices on the Changes in Crude Oil Prices in Chosen US Cities. ENTRENOVA - ENTerprise REsearch InNOVAtion, 8(1), 9-15. https://doi.org/10.54820/entrenova-2022-0002

Torrado, M., & Escribano, Á. (2020). European gasoline markets: Price transmission asymmetries in mean and variance. Applied Economics, 52(42), 4621-4638. https://doi.org/10.1080/00036846.2020.1739224

Tweeten, L. G., & Quance, C. L. (1969). Positivistic Measures of Aggregate Supply Elasticities: Some New Approaches. American Journal of Agricultural Economics, 51(2), Article 2. https://doi.org/10.2307/1237584

Downloads

Published

2024-03-12

How to Cite

Szomolányi, K., Lukáčik, M., & Lukáčiková, A. . (2024). Relation of Retail Gasoline and Diesel Prices in Croatia with Crude Oil Prices on World Markets. ENTRENOVA - ENTerprise REsearch InNOVAtion, 9(1), 41–49. Retrieved from https://hrcak.srce.hr/ojs/index.php/entrenova/article/view/30322

Issue

Vol. 9 No. 1 (2023)

Section

Mathematical and Quantitative Methods

License

Copyright (c) 2024 Karol Szomolányi, Martin Lukáčik, Adriana Lukáčiková

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.