Asymmetric pass-through of crude oil prices to gasoline prices: evidence from the Chinese gasoline pricing reform

As the second-largest oil consumer and the largest crude oil importer in the world, China's retail gasoline market has been increasingly linked to the crude oil market due to its retail oil pricing reform. It has been evident that gasoline price often exhibits an asymmetric response to the crude oil price change, i.e., the 'rocket and feather' effect, which states that gasoline price adjusts faster when oil price increases than when oil price decreases. This paper investigates the asymmetric pass-through of crude oil prices to gasoline prices by employing panel data covering the monthly gasoline prices of 16 cities in China, spanning from January 2004 to December 2019. The results show that the asymmetric adjustment in China's gasoline retail prices indeed exists, and it varies across different phases of China's oil pricing reform.