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Cointegration in the Oil Market among Regional Blends

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  • Neil A. Wilmot

    (Department of Economics, University of Minnesota Duluth, 1318 Kirby Drive, Duluth, MN 55812, USA)

Abstract

The integration of crude oil spot prices, from different geographic regions is examined using the residual-based cointegration test of Gregory and Hansen (1996), which allows for endogenously determined structural breaks. While traditionally, the focus has been on three global benchmark crudes (WTI, Brent and Dubai Fateh), herein the relationship among secondary, regional blends (Edmonton Par, Western Canadian Select, Bonny Light and Mexican Maya) is examined with implications for the global pool hypothesis. Monthly data is examined, with particular emphasis placed on the Canadian perspective. The results indicate that the regional crudes, of similar and differing grades, are cointegrated with a structural break. Events with a direct impact on the crude market are linked to the structural breaks. Indirect impacts are attributed to events which appear to have affected crude oil prices via a decrease in demand, such as the economic uncertainty leading to and during the Great Recession .

Suggested Citation

  • Neil A. Wilmot, 2013. "Cointegration in the Oil Market among Regional Blends," International Journal of Energy Economics and Policy, Econjournals, vol. 3(4), pages 424-433.
    • Handle: RePEc:eco:journ2:2013-04-26
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    References listed on IDEAS

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    Cited by:

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    3. Niyati Bhanja & Samia Nasreen & Arif Billah Dar & Aviral Kumar Tiwari, 2022. "Connectedness in International Crude Oil Markets," Computational Economics, Springer;Society for Computational Economics, vol. 59(1), pages 227-262, January.
    4. Kornienko, Natalia (Корниенко, Наталья) & Velikova, Elena (Великова, Елена) & Gulyaeva, Svetlana (Гуляева, Светлана) & Korolev, Georgiy (Королев, Георгий) & Pushkareva, Nataliya (Пушкарева, Наталья) &, 2017. "Prospects for Improving the Taxation of E-Business in the Russian Federation [Перспективы Совершенствования Налогообложения Электронного Бизнеса В Российской Федерации]," Working Papers 021717, Russian Presidential Academy of National Economy and Public Administration.
    5. Caporin, Massimiliano & Fontini, Fulvio & Talebbeydokhti, Elham, 2019. "Testing persistence of WTI and Brent long-run relationship after the shale oil supply shock," Energy Economics, Elsevier, vol. 79(C), pages 21-31.
    6. Galay, Gregory, 2019. "Are crude oil markets cointegrated? Testing the co-movement of weekly crude oil spot prices," Journal of Commodity Markets, Elsevier, vol. 16(C).
    7. Kuck, Konstantin & Schweikert, Karsten, 2017. "A Markov regime-switching model of crude oil market integration," Journal of Commodity Markets, Elsevier, vol. 6(C), pages 16-31.
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    More about this item

    Keywords

    Spot prices; cointegration; structural breaks;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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