PETROL PRICE ASYMMETRIES IN AUSTRALIAN LOCAL MARKETS AND WESTERN SAMOA

摘要

In periods of highly volatile petrol prices consumers across the world are extremely sensitive to the price of petrol. In Australia despite the interest from the public there is a lack of publicly accessible empirical analysis on the topic. This paper aims to provide an empirical analysis of petrol price asymmetries in three Australian local markets, by investigating if there is an asymmetric transmission from the international benchmark price to the local market price. rnThree different geographical markets within Australia are evaluated in this study. . Most gasoline price asymmetry articles in the literature that analyse local markets focus on urban areas, with regional markets largely ignored. For this reason we have selected two urban areas, Sydney and Perth, and the Pilbara region of Western Australia, which is a sparsely populated rural area. Much is said in the media about the inequity of petrol pricing in country areas compared to city areas, however there is little empirical analysis on how transmission processes differ between urban and rural areas and the literature on gasoline pricing in general has ignored rural areas and instead focused on urban areas. This study will compare the transmission processes of urban and rural prices and while the result regarding the speed of transmission is unsurprising (prices in the rural area adjust much slower to changes in wholesale prices), the findings regarding whether pricing in the rural area is asymmetric yields a surprising result. rnIn our study we also consider a dataset from a price setting regime, Western Samoa, where the Government has controls over the petrol price and the nation is supplied by one multinational oil company. Each month the price is negotiated by both parties and there is the opportunity for prices to be sticky on the way up and flexible on the way down. We would therefore expect to find symmetric pricing in Samoa.