Fuel transmission price mechanism: a brief review of the literature

This article presents a brief review of the literature about the price adjustment mechanisms in retail fuel market. This is a pertinent topic of study because the asymmetric behavior of price changes influences consumer welfare, competition between retailers and the possibility of obtaining abnormal profits. Oil has become very important for a country's economy and in peoples everyday lives because it enables the realization of many activities. But the high volatility of oil prices brings uncertainty for the global economy. Although some studies have shown that price transmission is symmetric between wholesalers and retailers, there are, also, a considerable number of studies that show precisely the opposite, where fuel prices rise more rapidly when there is an increase in oil prices, than fall after a drop in oil prices.This work has been supported by COMPETE: POCI-010145-FEDER-007043 and FCT – Fundação para a Ciência e Tecnologia within the Project Scope: UID/CEC/00319/2013