Oil and pump prices: Testing their asymmetric relationship in a robust way

The aim of this study is to provide a novel method to assess whether retail fuel prices respond asymmetrically to changes in the international crude oil prices. To do so, we consider the whole supply chain, we use daily data and we depart from the current practice in the literature that focuses on prices. Rather, we consider the mark-ups of both the refineries and retailers. Hence, we show that we first need to assess whether the refineries' mark-up responds asymmetrically to the international crude oil prices and subsequently whether the retailers' mark-up shows an asymmetric behaviour relatively to changes in the refined fuel prices. Focusing in Greece as our case study, our findings show that Greek fuel retailers do not change their mark-up behaviour based on changes of the refined fuel price. By contrast, the asymmetric behaviour is evident in the refineries' mark-up relatively to changes in the international crude oil prices, which is then passed through to the retailers and consumers. Finally, we provide evidence that weekly and monthly data mask any such asymmetric relationship. Thus, we maintain that unless the appropriate data frequency, fuel price transformations and the whole supply chain are considered, misleading findings could be revealed