Regime-Dependent Asymmetric Price Transmission in UK Road Fuel Markets: Evidence from an Endogenous Structural Break

This paper examines whether the relationship between wholesale and retail road fuel prices in the UK is stable over time or varies across structural regimes. Using monthly data on super and premium unleaded petrol over 2000–2021, the analysis first applies the unknown structural break methodology of Karavias (2021), which identifies a statistically significant break in November 2010. The sample is then divided into pre- and post-break regimes and estimated using a two-step nonlinear autoregressive distributed lag (NARDL) framework. This approach allows for asymmetric pass-through of positive and negative wholesale price changes in both the short and long run. The results indicate a clear change in the nature of price transmission across regimes. In the pre-2010 period, wholesale price decreases are propagated more strongly to retail prices than increases, indicating negative asymmetry. In contrast, the post-2010 period is characterised by a reversal of this pattern, with positive wholesale price shocks propagated more strongly than negative shocks. While asymmetries remain statistically significant in both regimes, their direction changes over time rather than their overall magnitude. These findings suggest that asymmetric price transmission in UK fuel markets is not structurally stable but varies across regimes identified endogenously from the data. Despite the existence of other breaks such as 2015;2017; the 2010 break coincides with a period of broader economic and institutional change. 2010 is opted as the main structural break and the subsequent data breaks detected by Karavias (2021) are used for robustness estimation of subsamples purposes.