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

Valadkhani, Abbas (2010): Modelling the Price of Unleaded Petrol in Australia’s Capital Cities. Published in: Australasian Accounting Business and Finance Journal , Vol. 4, No. 2 (2010): pp. 19-38.

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Abstract

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.

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