I chose to analyze the monthly evolution from January 1, 1995 to January 1, 2021, totaling 314 observations, of the price of a gallon of fuel at the pump in the United States of America and the price of a barrel of OPEC oil in order to verify if there is really a direct link between the two, or if the price of fuel evolves differently from that of a barrel of oil due to the other additions associated with it such as taxes, intermediate costs or profit margin.
There is an asymmetric relationship between these two variables, with the pump price reacting faster to increases in oil prices than to decreases. This asymmetry is caused by the delay in adjusting production volume and individual inventories, but also by the significant market power held by certain distributors. Spot fuel prices show signs of asymmetry in the response to adjustments in the price of a barrel of oil, reflecting the effects of changes in distributors' inventories. (Severin Borenstein et al., 1997)
The data concerning the average price per gallon of fuel in the United States was taken from the Kaggle website (Ruanova, 2021). These observations originally had a weekly frequency and were converted to a monthly frequency. Column A2 was chosen because it contains fuels commonly used by the general population (diesel and gasoline). These data were coded under the name Oprice for analysis.
As for the oil price per barrel data, these data were taken from the Indexmundi website which centralised the data provided by the World Bank (World Bank, 2021). These observations represent the dollar value of a barrel of oil according to OPEC. These data have been renamed Coprice for analysis.
Sources:
• Severin Borenstein, A. Colin Cameron, Richard Gilbert, Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?, The Quarterly Journal of Economics, Volume 112, Issue 1, February 1997, Pages 305–339, https://doi.org/10.1162/003355397555118
• Mau Ruanova. „U.S. Gasoline and Diesel Retail Prices 1995-2021”. Kaggle (2021). URL: https://www.kaggle.com/mruanova/us-gasoline-and-diesel-retail-prices-19952021