DO GASOLINE PRICES RESPOND ASYMMETRICALLY TO CRUDE-OIL PRICE CHANGES

We test and confirm that retail gasoline prices respond more quickly t o increases than to decreases in crude oil prices. Among the possible sources of this asymmetry are production/inventory adjustment lags and market power of some sellers. By analyzing price transmission at diff erent points in the distribution chain, we attempt to shed light on th ese theories. Spot prices for generic gasoline show asymmetry in respo nding to crude oil price changes, which may reflect inventory adjustme nt effects. Asymmetry also appears in the response of retail prices to wholesale price changes, possibly indicating short-run market power a mong retailers.