Has Gasoline Price Pass-through Speed Increased?

During the past decade, many changes in the motor gasoline market has resulted an increase in the rapidity that price changes are passed through from crude oil to gasoline wholesale to the retail prices seen by the consumer.  As a consequence, we suspect that the pass-through asymmetry (prices rising faster than they fall) has decreased in recent years.  The objective of this study is to show the magnitude of change in the pass-through speed and test the hypothesis of decreasing price asymmetry.

This study uses U.S. prices and conducts the analysis at the national and regional level using weekly prices for the time period beginning in January 2000.  The study uses weekly gasoline price obtained from EIA’s survey of national and regional retail prices, and daily regional wholesale gasoline prices and a crude oil price obtained from Reuters.  The data were analyzed using threshold and state-space models, using maximum likelihood estimation.

The merits of the findings from this paper have obvious policy and practical applications.