The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data

Abstract

Using millions of individual gasoline prices collected at a daily frequency, we examine the speed at which market prices of refined oil are transmitted to retail gasoline prices in France. For that, we estimate a reduced‐form model of state‐dependent pricing where thresholds triggering price changes are allowed to vary over time and depend on the duration since the last price change. We find that the degree of pass‐through of wholesale prices to retail gasoline prices is on average 0.77 for diesel and 0.67 for petrol and depend on local market characteristics. The duration for a shock to be fully transmitted into prices is about 10 days. There is no significant asymmetry in the transmission of wholesale price to retail prices. Finally, the duration since the last price change has a significant effect on thresholds triggering price changes but a large variance of idiosyncratic shocks on thresholds is also crucial to replicate the size distribution of price changes.

The Macroeconomics of Sticky Prices with Generalized Hazard Functions

“…Barro (1972); Dixit (1991); Caplin and Spulber (1987); Golosov and Lucas (2007), and has been found to be relevant empirically, see e.g. Eichenbaum, Jaimovich, and Rebelo (2011); Gautier and Saout (2015). The notion of a generalized hazard function, and its derivation from first principles, were developed in seminal "menu-cost" papers by Caballero and Engel (1993a and Dotsey, King, and Wolman (1999), and later revisited using information theoretical foundations by Woodford (2009) and Costain and Nakov (2011b).…”

More Facts About Prices: France before and during the Great Recession

“…This is in line with Nakamura and Steinsson (2008) who find a median size of price 24. See, for example, Gautier and Le Saout (2015) for an analysis of gasoline prices at higher frequency. change of 29.5% in absolute value.…”

The Environmental Effect of Green Taxation: The Case of the FrenchBonus/Malus

“… This information comes from a database that gives day‐to‐day fuel prices for each petrol station since 2007, see Gautier and Le Saout ) for more details. …”