PRICES ASYMMETRY OF CRUDE OIL AND OIL DERIVATIVES

The issue of price asymmetry is increasingly coming into the focus of scientists due to the growing automobile dependency and negative distribution of revenues connected with the erratic formation and asymmetry of prices. A majority of empirical studies examine behaviours in fuel pricing on the market with regard to changes in oil prices. The results vary, and most authors negate the premise of symmetrical price adjustment, seeking to prove that prices react faster to increasing than to decreasing oil prices. A review of past studies showed that they differ in data frequency, data sample, period, choice of input prices and specification model, hence the conclusions on price asymmetry also differ. This is why the asymmetry of oil prices and oil derivatives has been the subject of numerous discussions and analyses, especially when there is a price increase in oil derivatives that indirectly affects revenue distribution. This paper describes three types of price asymmetry: depending on the length of the reaction period, depending on the size of change, and a combination of the time and size of the reaction. Accordingly, the objective of this paper is to contribute to the quantification of price asymmetry of oil and oil derivatives in the Republic of Croatia, with special attention given to the period from February 2014 to September 2019 when the market formation of prices was introduced. Given the frequent oscillations of oil prices, it can be observed that the prices of oil derivatives increase when the price of crude oil increases, while there is no adequate correction of the retail price of oil derivatives when oil prices drop. Whether the traders on the domestic market adapt equally when oil prices fall and grow will depend on several factors, and this paper aims to provide an overview of them. Considering that Croatia meets the majority of its demand for oil and derivatives from import, this topic is gaining in importance. The period after the introduction of free price formation since February 2014 is of particular interest.