SYMMETRICAL OR ASYMMETRIC PRICE ADJUSTMENTS IN THE OIL MARKET - AN EMPIRICAL-ANALYSIS OF THE RELATIONS BETWEEN INTERNATIONAL AND DOMESTIC PRICES IN THE FEDERAL-REPUBLIC-OF-GERMANY, 1972-89

This paper investigates how German consumer and wholesale prices for gasoline and light heating oil react to changes in the corresponding Rotterdam prices. Monthly data from 1972 to 1989 are employed, and the subperiods of the 1970s (1972 to 1979) and 1980s (1980-1989) are distinguished. Error correction models are estimated to separate long-run equilibrium relations and short-run adjustment processes. For the 1980s, we find rapid, symmetric and full adjustment of the German prices to the Rotterdam prices, whereas during the 1970s we find some asymmetries, and at least for gasoline the adjustment processes took considerably more time.