Marathon Oil Corporation is an integrated international energy company engaged in exploration and production; oil sands mining; integrated gas; and refining, marketing, and transportation (Marathon Oil Corporation, 2009). The key to optimizing production and resource development is quick and accurate description of oil and gas reservoirs (Marathon Oil Corporation, 2009). For crude oil to be processed into gasoline, diesel fuel, and other petroleum products, it takes about four to eight days (Marathon Petroleum Company, 2009). The benefits of these reservoirs are higher success rates in discovery, drilling, and production activities (Marathon Oil Corporation, 2009). Also, the expertise of Marathon in reservoir characterization begins
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The explanations include market power, search costs, consumer response to changing prices, inventory management, accounting practices, refinery adjustment costs, and the behavior of markups over the business cycle (Brown & Yucel, 2000). Although popular opinion seems to attribute the asymmetry to market power, Peltzman (2000) shows that price asymmetries arise independently of market structure. In addition, no formal theory relates market power to asymmetric response of downstream prices to changes in upstream prices (Brown & Yucel, 2000).
Only after the customers engage in a costly and time-consuming search to find the lowest prices are the gas stations forced to lower prices to a competitive level (Brown & Yucel, 2000). A factor slowing the search process is that the costs of an intensive search are likely to be much higher for most consumers than the corresponding gains from finding a cheaper price for gasoline (Brown & Yucel, 2000).
The consumer response to changing gasoline prices may contribute to the asymmetry between movements in crude oil and gasoline prices at the retail level (Brown & Yucel, 2000). If consumers accelerate their gasoline purchases to beat further increases when its price is rising, they will increase inventories held in automobiles and quicken the pace at which the price rises (Brown & Yucel, 2000). If consumers fear running out of gasoline and do not slow their purchases when its price