Price pass-through in US gasoline markets

- Regional differences in the response of gasoline prices to crude oil price changes exist in both the short run and long run.
- Statistical differences in the speed of adjustment of US retail gasoline prices between regions disappear after two weeks.
- Retail gasoline prices in most regions adjust faster in the short run to crude oil price increases than for price decreases.

Using an error-correction model in a seemingly unrelated regression framework, we examine regional differences in the price pass-through from crude oil spot prices to retail gasoline pump prices. We show that regional differences do exist both in the short run and long run adjustment processes. Depending on the region, a $1 per barrel change in crude oil prices is correlated with a change in retail gasoline pump prices somewhere between 2.36¢ and 2.58¢. We examine the presence of the rockets and feathers phenomenon using both single period coefficient tests and multiple period impulse response functions.