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Breaks, trends, and unit roots in spot prices for crude oil and petroleum products

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  • Sun, Jingwei
  • Shi, Wendong

Abstract

This study examines the trend properties in energy price series using weekly spot price data for crude oil, heating oil, and regular gasoline. In particular, the procedures proposed by Perron and Yabu (2009b) are employed to test for a one-time break in the trend function of each price series with no prior knowledge of whether the noise component is stationary or has an autoregressive unit root. Based on the results of the break estimate, the unit root test developed by Kim and Perron (2009) is performed to examine the stationarity of the prices. Finally, we extend the one-break analysis to the case with multiple breaks by employing the break test proposed by Kejriwal and Perron (2010) and the unit root test of Carrion-i-Silvestre et al. (2009). The results consistently demonstrate evidence of structural breaks and reject the unit root null hypothesis for all the price series, suggesting that energy prices are persistently influenced by long-term economic fundamentals instead of temporal policy changes.

Suggested Citation

  • Sun, Jingwei & Shi, Wendong, 2015. "Breaks, trends, and unit roots in spot prices for crude oil and petroleum products," Energy Economics, Elsevier, vol. 50(C), pages 169-177.
    • Handle: RePEc:eee:eneeco:v:50:y:2015:i:c:p:169-177
    DOI: 10.1016/j.eneco.2015.05.001
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    7. Aurelio F. Bariviera & Luciano Zunino & Osvaldo A. Rosso, 2016. "Crude Oil Market And Geopolitical Events: An Analysis Based On Information-Theory-Based Quantifiers," Fuzzy Economic Review, International Association for Fuzzy-set Management and Economy (SIGEF), vol. 21(1), pages 41-51, May.
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    9. Christian Gourieroux & Joann Jasiak & Michelle Tong, 2021. "Convolution‐based filtering and forecasting: An application to WTI crude oil prices," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(7), pages 1230-1244, November.
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    More about this item

    Keywords

    Structural break; Unit root; Trend; Crude oil; Petroleum products;
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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