International Oil Price Fluctuations and the Asymmetric Response of Domestic Oil Analysis

Abstract

This paper examines an asymmetry in the price of petroleum products for the price of international oil in Korea. Change in the price of petroleum products will have a distinct asymmetry. In other words, the domestic price of gasoline rises more rapidly in response to an increase in the price of international oil than it declines in response to a decrease in the price of international oil. It is called ‘rocket and feather’ phenomenon. Previous studies did not found the asymmetry of the prices in Korea but some studies insist that the reason the early studies did not find an asymmetry of the price because of the different periods considered. In this paper, we divide a considered period into three sectors which are affected by economic events. Change in international Dubai oil prices for the domestic gasoline prices showed asymmetric reactions during the entire period.