Speed of Price Changes in the Retail Motor Gasoline Market Title Change in January 2003 to: Gasoline Price Pass-Through Analysis Agenda Year: 2002 Analysis Theme:Energy Supply, Consumption, and Price Developments Sponsoring Office: Office of Oil & Gas Contact(s): ): John Zyren , Michael Burdette, Joanne Shore Product Summary: a. This report is an update and improvement over previous work done in this area. It will answer a recurring question in retail petroleum product markets: how rapidly do regional retail motor gasoline price respond to changes in spot prices. By econometrically investigating the spot and retail markets, a quantitative measure of how long it takes for retail prices to equilibrate in each PADD will be provided, along with an explanation of how the gasoline markets function. The report may also address the issue of whether regional retail prices react asymmetrically to spot price changes and what affect any regional asymmetry would have on a nation average retail price. b. The analysis will proceed by first determining the correct spot price (or mix of spot prices) which will affect the retail prices in a particular region; this will be done by market analysis and quantitative (e.g., regression, principal components) methods. Structural time series models will then be developed to quantitatively describe the lagged time relationship between spot and retail motor gasoline prices. The analysis will be performed using weekly data in order to capture rapid price movements. The focus of this study will be regional price behavior; however, aggregation methods for producing national models will be explored. c. The results of this work will expand and complete the market analysis begun in the preliminary “Motor Gasoline Assessment, Spring 1997”, (DOE/EIA-0613), “Summer 1997 Motor Gasoline Price Increase”, (DOE/EIA-0621) and the recently completed price symmetry/asymmetry in motor gasoline markets (Price Changes in the Gasoline Market”, DOE/EIA-0626). d. Data from EIA weekly retail surveys will be used wherever possible. Reuter’s and/or Platt’s daily spot price date will be aggregated to weekly frequency. e. The report will prepare and answer to the question of how fast gasoline spot prices are passed through in regional markets to the retail level. The information obtained will provide insights into the efficiency of price transfers in regional markets and should provide and should provide a basis to address the question of anomalously rapid retail price changes in PADD 2. The report will also provide information from which regional short-term retail price forecasts can be made. f. There are no significant limitations to the analysis. The relevant spot and retail price data are becoming more readily available. Schedule: Start Date: Jan 2001 Completion Date: Completed 15 Jan 2003 - Web only report If you are having technical problems with this site, please contact the EIA Webmaster at wmaster@eia.doe.gov Contacts: nancy.nicoletti@eia.doe.gov or ingrid.springer@eia.doe.gov Return to table of contents.