اثرات پیش بینی شده و پیش بینی نشده قیمت نفت خام و تغییرات موجودی بنزین بر قیمت بنزین

This paper examines the effect of anticipated and unanticipated changes in oil prices and gasoline inventory on US gasoline prices. We estimate empirical responses to anticipated and unanticipated changes in oil prices and gasoline inventory and show that gasoline price adjustments are faster and stronger for anticipated changes in oil prices and inventory levels than for unanticipated changes. Furthermore, this difference is statistically significant. We use these findings to evaluate the cost of adjustment hypothesis suggested by Borenstein and Shephard (2002). We also find that there is an asymmetry in the effect of gasoline inventory on gasoline and oil prices. This finding complements a well-known result that positive and negative changes in oil prices have asymmetric effect on gasoline prices.

The question of lags in the response of gasoline prices to oil price changes has received considerable attention from researchers. Since the study by Borenstein et al. (1997) which illustrates that gasoline prices adjust slowly to changes in crude oil prices, several explanations of the observed phenomena have been suggested and tested. Borenstein and Shepard (2002) argue that the slow response of gasoline prices is attributed to the high cost of adjustment of production and inventory.2Johnson (2002) argues that a search cost may lead to long lags in the response of gasoline prices. Godby et al. (2000) empirically explore the behavior of gasoline and oil prices and suggest that only oil price changes that are bigger than some threshold level leads to revision of gasoline prices. Similar results were obtained by Radchenko (2005a) who points to possible nonlinearities in retail gasoline prices and the role that different kinds of oil price fluctuations play in the gasoline price response. In this paper, we add new evidence to the literature by examining the response of gasoline prices and inventories to anticipated and unanticipated oil price shocks. We use a methodology originally developed by Cochrane (1998) to distinguish between the effects of anticipated and unanticipated shocks and apply it to analyze the lags in the response of gasoline prices and inventories. The analysis is conducted in two steps. First, we develop a reduced form model3 that captures interactions between oil prices, gasoline prices and gasoline inventories. Second, applying the Cochrane methodology to our model we estimate and compare effects of anticipated and unanticipated shocks. The findings of our paper can be summarized as follows. First of all, we show that anticipated shocks lead to significantly stronger and faster response than unanticipated shocks. The latter is consistent with the cost of adjustment hypothesis proposed by Borenstein and Shepard (2002). The reason is that the production and holding costs can make it sub-optimal for refineries to adjust immediately. When the shock is anticipated, refineries have an option of beginning the adjustment earlier, in particular, prior to the shock. With the unanticipated shock, refineries do not have such an option which makes the unanticipated response more delayed. As for the fact that the response to an anticipated shock is stronger, we argue in the paper that it is hard to reconcile with the solely cost-related reasons. We conjecture that incomplete information about the shock and subsequential learning might be partially responsible for a stronger response to an anticipated shock. Our second finding is that we observe a statistically significant asymmetry in the effects of positive and negative oil and inventory shocks. In the literature, it has been already established that positive oil shocks have stronger effect on gasoline prices than negative shocks.4 We replicate this finding in our analysis and in addition we demonstrate that the inventory shocks also have this asymmetric effect on gasoline prices. The positive inventory shocks, which we interpret as demand shock, produce more pronounced response that is significant both in the short- and the long-run. The negative inventory shocks have much weaker effect that is significant only in the short-run. Third, we show that gasoline inventory level has a “feedback” effect on oil prices. This finding is new in the literature and perhaps somewhat surprising because oil prices could be considered exogenous for gasoline industry. However, both anecdotal evidence and the common sense suggest that this effect might exist.5 We show in the paper that inventory shocks do have a significant effect on oil prices and it is also asymmetric. An increase in the inventory level leads to a significant decrease in oil prices, whereas a decrease in inventories does not have a significant effect. The contribution of our paper to the literature is three-fold. First, using Cochrane methodology we develop and estimate an adjustment model that allows anticipated and unanticipated shocks to have different effects on gasoline prices and other variables of interest. This is particularly important since accounting for such a difference can explain the difference in results reported in the literature. Furthermore, allowing anticipated and unanticipated shocks to have different effects provides additional evidence to evaluate the Borenstein and Shepard (2002) result. Second, we include the gasoline inventory variable into our analysis. The inclusion of inventories is a very natural step given that inventory level is one of the main decision variables for producers together with output prices and production levels. However, to our knowledge this is the first paper that uses inventory data in the analysis of delayed adjustment of gasoline prices. Finally, the inclusion of inventory variable into the analysis enables us to investigate questions that were not previously addressed in the literature. In particular, we show that there is an asymmetry in gasoline and oil price responses to inventory shocks and that there is a “feedback” effect of gasoline inventories on oil prices. The structure of the paper is as follows. We present motivation for considering the model that separates anticipated and unanticipated shocks in Section 2. In Section 3, we explain the details of the econometric approach that we use to construct gasoline price responses to anticipated and unanticipated movements in oil prices and gasoline inventory. In Section 4, we describe the data and results. Concluding remarks are in Section 5.

In this paper we apply an adjustment model that allows anticipated and unanticipated shocks to have different effects. We estimate this model and show that anticipated shocks lead to significantly stronger and faster responses than unanticipated shocks. For example, the response of gasoline prices to an anticipated change in oil prices is fast and completed within a week after the oil price change. On the other hand, the gasoline price response to unanticipated oil price changes is slow and incomplete. We use these findings to evaluate the cost of adjustment hypothesis for delays in the gasoline price adjustment. On one hand, the fact that the response to an unanticipated shock is more delayed provides evidence that supports the hypothesis. Indeed, production and holding costs can make it suboptimal for refineries to adjust immediately. However, when the shock is anticipated the refineries might start and complete the adjustment earlier which would make the response to unanticipated shocks more delayed. On the other hand, the fact that the response to the anticipated shock is much stronger is hard to reconcile with the explanation that would be based solely on the cost considerations. It suggests that the cost of adjustment hypothesis cannot be entirely responsible for the difference in responses to anticipated and unanticipated shocks. We conjecture in the paper that refineries' learning about the shock might be partially responsible for this difference. Another contribution of the paper is that in our analysis we include the gasoline inventory variable into the estimated model. We find that there is a negative relationship between gasoline inventory and gasoline prices. Gasoline prices increase (decrease) significantly after a decrease (increase) in gasoline inventory. This result is very intuitive given that the most probable source of the inventory shock is actually demand shock. We also find that changes in gasoline inventories have significantly asymmetric effect on gasoline prices and that gasoline inventories have a “feedback” effect on oil prices. In particular, an increase in gasoline inventories leads to a significant decrease in oil prices. These findings have not been previously documented in the literature. In sum, the obtained results present new evidence about the role of anticipated and unanticipated oil price and gasoline inventory changes on gasoline prices. The restriction about the effect of anticipated oil price and gasoline inventory changes determines the adjustment of gasoline prices. Future work should use a structural approach to analyze this question further.