This paper investigates whether retail gasoline prices respond asymmetrically to changes in crude oil prices. The authors find that retail gasoline prices adjust more quickly to increases in crude oil prices than to decreases. The response to a crude oil price increase is largely reflected in the pump price within four weeks, while decreases are passed along gradually over eight weeks. The asymmetry could be due to market power at some level of the distribution chain or inventory adjustment costs. By analyzing price transmission at different points in the distribution chain, the authors investigate these theories. They find that some asymmetry occurs at the level of the competitive spot market for gasoline, possibly reflecting inventory costs. Wholesale gasoline prices, however, exhibit no asymmetry in responding to crude oil price changes, indicating that refiners who set wholesale prices are not the source of the asymmetry. The most significant asymmetry appears in the response of retail prices to wholesale price changes. The authors argue that this probably reflects short-run market power among retail gasoline sellers. The production and distribution of gasoline in the U.S. involves multiple market transactions. Gasoline is produced from crude oil, refined, and distributed through various channels. The process includes transactions between refiners, jobbers, and retailers. The prices of these transactions reflect the opportunity costs of the inputs. The authors use data on crude oil prices and gasoline prices to analyze the transmission of price changes through the distribution chain. They find that the response of retail gasoline prices to crude oil price changes is asymmetric, with prices adjusting more quickly to increases than to decreases. The asymmetry is most pronounced in the response of retail prices to wholesale price changes, suggesting that short-run market power among retail gasoline sellers may be responsible for the asymmetric response of retail gasoline prices to crude oil price changes. The authors also find that the asymmetry in the response of retail prices to crude oil price changes is not fully explained by inventory costs alone. The asymmetry in the wholesale-retail transmission indicates that imperfect competition in retail markets may be substantially responsible for the asymmetric response of retail gasoline to crude oil price changes.This paper investigates whether retail gasoline prices respond asymmetrically to changes in crude oil prices. The authors find that retail gasoline prices adjust more quickly to increases in crude oil prices than to decreases. The response to a crude oil price increase is largely reflected in the pump price within four weeks, while decreases are passed along gradually over eight weeks. The asymmetry could be due to market power at some level of the distribution chain or inventory adjustment costs. By analyzing price transmission at different points in the distribution chain, the authors investigate these theories. They find that some asymmetry occurs at the level of the competitive spot market for gasoline, possibly reflecting inventory costs. Wholesale gasoline prices, however, exhibit no asymmetry in responding to crude oil price changes, indicating that refiners who set wholesale prices are not the source of the asymmetry. The most significant asymmetry appears in the response of retail prices to wholesale price changes. The authors argue that this probably reflects short-run market power among retail gasoline sellers. The production and distribution of gasoline in the U.S. involves multiple market transactions. Gasoline is produced from crude oil, refined, and distributed through various channels. The process includes transactions between refiners, jobbers, and retailers. The prices of these transactions reflect the opportunity costs of the inputs. The authors use data on crude oil prices and gasoline prices to analyze the transmission of price changes through the distribution chain. They find that the response of retail gasoline prices to crude oil price changes is asymmetric, with prices adjusting more quickly to increases than to decreases. The asymmetry is most pronounced in the response of retail prices to wholesale price changes, suggesting that short-run market power among retail gasoline sellers may be responsible for the asymmetric response of retail gasoline prices to crude oil price changes. The authors also find that the asymmetry in the response of retail prices to crude oil price changes is not fully explained by inventory costs alone. The asymmetry in the wholesale-retail transmission indicates that imperfect competition in retail markets may be substantially responsible for the asymmetric response of retail gasoline to crude oil price changes.