Asymmetric pricing of diesel at its source

- Diesel prices rise faster than they fall in response to changes in the oil price.
- Suppliers adopt coordinated asymmetric pricing behaviour at their source.
- Melbourne is the fastest in passing on the price increases.
- Hobart is the slowest in passing on the price decreases.
- There has been less co-movement between diesel prices and the oil price since 2007.

Competitive diesel pricing can yield tangible benefits to truck drivers, fleet operators and farmers. The ability, and willingness, of wholesale distributors to asymmetrically pass on changes in diesel costs to consumers can adversely distort the market. Existing studies for Australia have focused on petrol (gasoil) prices, while there has been no testing for asymmetry in diesel prices. We test for rocket and feather effects in Australian wholesale diesel prices at their source. We find that in all seven seaport cities, when the price of oil goes up, diesel prices shoot up like a rocket and when the price of oil decreases, diesel prices fall like a feather. The asymmetric responses are more noticeable when oil prices are rising than falling. Results support the view that suppliers adopt or coordinate almost the same asymmetric pricing behaviour before distributing diesel among retailers.