UNE Professor puts petrol prices under the spotlight

Published 29 May 2013

PetrolProfessor of Macroeconomics in the UNE Business School, Professor Abbas Valadkhani, has been in the news recently talking about his recent article, ‘Do petrol prices rise faster than they fall when the market shows significant disequilibria?’ published in the journal Energy Economics.

Professor Valadkhani’s paper examines if petrol prices in Australia rise faster than they fall and identifies in which locations the “rocket-and-feather” hypothesis applies.  The research analyses more than five years of data and finds that the hypothesis applies in 28 of 111 retail locations nationwide.

Professor Valadkhani says of his research, “It is interesting to note that out of the 28 retail locations exhibiting significant adjustment asymmetry, none were from Western Australia, where FuelWatch is effectively monitoring petrol prices unlike the rest of the country. I have also found that the three “motorist friendly locations” are in SA and WA.”

Professor Valadkhani believes that the Australian Competition and Consumer Commission should focus on the pricing behaviour of retailers in the 28 identified locations.

As identified in the research paper, Australian households spend a significant share of their income on petrol thus price rises of this commodity have a tangible effect on their standard of living particularly for poor families.  The community interest in fluctuating petrol prices ensures that Professor Valadkhani’s work creates significant media interest whenever a new paper is published.

The research results were discussed on the “Meet the Press” program (19 May 2013) by the Independent Senator for SA Nick Xenophon and Katharine Robinson. 

Professor Valadkhani has undertaken a number of interviews with mainstream media outlets with John Rolfe, the Cost of Living Editor at News Limited offering a good overview of the research which can be read here.

This article also appeared in The Australian, The Daily and Sunday Telegraphs in Sydney, the Courier Mail and the Sunday Mail in Brisbane, The Sunday Territorian in Darwin, and the online news sites CarsGuide, Adelaide Now and Sydney Now. Professor Valadkhani has also undertaken a number of radio interviews.

In his interview, Professor Valadkhani concludes “Based on the results, one can argue that there is convincing evidence for the existing of the adjustment asymmetry.  By identifying the locations in which asymmetric pricing is more prevalent, this paper can lead to the greater efficiency and transparency of the petrol market, particularly in view of recent debates surrounding suspected profiteering in the petrol industry.”

Professor Valadkhani’s research examined price variations from 2007 to 2012 and was funded by the Federal Government’s Australian Research Council Discovery Project.