Taxation and the Asymmetric Adjustment of Selected Retail Energy Prices in the UK
14 Pages Posted: 14 Jun 2013 Last revised: 19 Sep 2013
Date Written: September 4, 2013
This paper investigates the adjustment of the prices of four key petroleum products in the UK following changes in the price of crude oil. We find significant evidence that the pre-tax prices of diesel, kerosene and gas oil adjust more rapidly in an upward than a downward direction but that the pre-tax price of unleaded petrol adjusts symmetrically. However, these patterns are obscured at the pump once one accounts for fuel duty and value added tax, raising the possibility that firms can use the tax system to conceal rent seeking behavior.
Keywords: Nonlinear ARDL (NARDL), Asymmetric Gasoline Price Adjustment, Rockets and Feathers Hypothesis
JEL Classification: C22, H23, Q40
Suggested Citation: Suggested Citation