Modelling the Price of Unleaded Petrol in Australia’s Capital Cities

This paper examines the long-run and short-run determinants of unleaded petrol price in Australia’s capital cities using monthly data to find out whether prices respond asymmetrically to external shocks. In the long-run petrol prices are mainly determined by Tapis crude oil and Singapore petrol prices. There is some evidence of asymmetric price adjustments in the short-run since petrol price increases have been mostly passed on to the consumer faster than price decreases in four capital cities. One can thus argue that there are a significant degree of market inefficiency and/or collusion, requiring a closer government price monitoring and scrutiny.