Oil price increases and decreases seem to have asymmetric effects

From an interesting 2003 review article by Jones, Leiby, and Paik (pdf):

The energy economics literature has noted the asymmetric responses of petroleum product prices to price changes for well over a decade, as observed by Balke, Brown, and Yücel (1998) in a review of previous studies.  Product prices rise more quickly in response to crude price increases than they decline in response to crude price reductions.  Using weekly data on crude prices and a variety of spot and whole gasoline prices, BBY (1998) find considerable support for asymmetry in the time pattern of downstream price changes to changes in upstream prices, although they find that different specifications of asymmetry yield different results.

Applied to the crude-product relationship, asymmetry has a different meaning than it does in the oil price-GDP relationship. In the crude-product relationship, the asymmetry is in the speed of the response, while in the oil price-GDP relationship, it is in the magnitude of the response. Competition will ensure that the magnitudes of the response of product prices to crude price changes are eventually equal. Otherwise profits in refining and distribution would grow without bound.

Here is a JSTOR link to a somewhat later Balke, Brown, and Yücel paper.  Here is their 2008 paper (pdf) on why the oil price/gdp link has weakened in the United States.  Here is a related 2010 paper (pdf).  Here is a recent James Hamilton blog post on oil gluts.  Here is Scott: “Focus on Q, not P.”