THE IMPACT OF OIL PRICES ON PETROLEUM PRODUCT PRICES IN CENTRAL EAST EUROPEAN MARKETS

Asymmetric price transmission in petroleum product markets implies a different speed and/or intensity of adjustment of petroleum product prices to crude oil price changes. The public perceives it as a rather quick response of petroleum product prices to oil price increases as oppose to their adjustment to crude oil price decreases. If found, asymmetric price transmission is a direct consequence of energy subjects' behaviour, exploiting oil price fluctuations at the expense of the customers. The existing literature, although rather vast, is still mainly focused on developed countries (primarily the USA), displaying substantial disparity in the research results. Using the asymmetric Error Correction Model, this paper aims to detect the existence of asymmetric price transmission in Eurosuper95 and Diesel markets in; Croatia, Czech Republic, Hungary, Slovenia, Slovak Republic and Poland prior to the EU accession of Croatia (from January 2005 to June 2013). The period under investigation is selected in order to detect possible differences in the behaviour of energy subjects on petroleum product markets of CEE EU countries, as oppose to Croatia that was not a member at the time. The results suggest complete absence of asymmetric price transmission when whole sample period is taken under consideration. However, when the original sample is split in two, as a robustness check, asymmetric price transmission was found in 33,33% of the analysed cases, indicating that asymmetric price transmission is not necessarily a continuous feature of petroleum product markets but can be found at shorter periods of time, linked to greater crude oil price fluctuations.