Liquid fuel price adjustment in Greece: a two-stage, threshold cointegration approach

Abstract

Greek consumers often complain that fuel prices in the domestic market adjust more quickly to crude oil price increases than decreases and characterize this pricing pattern as market power exploitation. This article attempts to investigate the issue of asymmetries in a two-stage price-adjusting mechanism able to indicate the source of price asymmetries, either in the refining or in the distribution stage. The sample consists of daily data covering the period of January 2012 to November 2018 and it has been split into two subsamples due to a structural break October 2014. Using threshold and momentum models of cointegration at different stages in the distribution chain, we find that transmission is mostly symmetric for the period between 2012 and 2014 and asymmetric in the first stage of refining for the recent period between 2014 and 2018.