Gasoline pricing asymmetry and the impact of oil shocks on inflation

Aim . This work aimed to assess the effectiveness of the Russian gasoline pricing regulation model in control of inflation and to identify its inherent distortions in the form of asymmetric pricing by comparing it with the experience of countries with liberalized markets. Objectives . The work seeks to identify and systematize the key grounds of government intervention in gasoline pricing; to analyze empirically the “rockets and feathers” hypothesis in gasoline markets in Russia and developed countries; and to assess the dynamic impact of gasoline retail price shocks on inflation rates in the countries under study. Methods . A nonlinear autoregressive model with distributed lags was used for the empirical analysis of asymmetry. The impact of gasoline price surges on inflation was assessed using vector error correction models and an impulse response function. Results . The study revealed a moderate pricing asymmetry in developed countries (3–10 %) and a radically high pricing asymmetry in Russia (over 1 000 %), which is a consequence of an institutional trap created in Russia by its specific model of gasoline market regulation. A shock transmission analysis revealed that administrative control over retail prices in Russia disrupted effectively the channel through which they influence inflation, ensuring macroeconomic and social stability in light of chronic price imbalances and the suppression of competition. Conclusions . The comparative empirical analysis can be used to draw a fundamental conclusion about the existence of asymmetric pricing in retail gasoline markets. The abnormally strong asymmetry in Russia is not a statistical anomaly, but a consequence of the specific regulatory model. Quasi-directive control of retail prices at the level of the inflation rate, combined with a damping mechanism, has created an institutional trap where gasoline prices actually cease to decline when global oil prices fall.