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Does OPEC influence crude oil prices? Testing for co-movements and causality between regional crude oil prices

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  • Jan Bentzen

Abstract

Using high-frequency data the co-movements among crude oil prices are analysed in order to address the question of regionalization of the world crude oil market. Time-series econometrics in the form of error-correction modelling is applied for daily crude oil price data covering the time period 1988 to 2004 and in this framework topics like weak and strong exogeneity among three major oil prices - represented by Brent, OPEC and Texas (WTI) - are addressed. The empirical results are that causality is most likely bi-directional among these crude oil prices - and hence rejecting a regionalization hypothesis of the global oil market - and also an influence from the OPEC oil price towards Bent and WTI, which are usually claimed to have a benchmark role.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 39 (2007)
Issue (Month): 11 ()
Pages: 1375-1385

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Handle: RePEc:taf:applec:v:39:y:2007:i:11:p:1375-1385

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Cited by:
  1. Lu, Feng-bin & Hong, Yong-miao & Wang, Shou-yang & Lai, Kin-keung & Liu, John, 2014. "Time-varying Granger causality tests for applications in global crude oil markets," Energy Economics, Elsevier, vol. 42(C), pages 289-298.
  2. Kaufmann, Robert K. & Dees, Stephane & Mann, Micheal, 2009. "Horizontal and vertical transmissions in the US oil supply chain," Energy Policy, Elsevier, vol. 37(2), pages 644-650, February.
  3. Xu, Bing & Ouenniche, Jamal, 2012. "A data envelopment analysis-based framework for the relative performance evaluation of competing crude oil prices' volatility forecasting models," Energy Economics, Elsevier, vol. 34(2), pages 576-583.
  4. Kao, Chung-Wei & Wan, Jer-Yuh, 2012. "Price discount, inventories and the distortion of WTI benchmark," Energy Economics, Elsevier, vol. 34(1), pages 117-124.
  5. Kaufmann, Robert K. & Ullman, Ben, 2009. "Oil prices, speculation, and fundamentals: Interpreting causal relations among spot and futures prices," Energy Economics, Elsevier, vol. 31(4), pages 550-558, July.
  6. James L. Smith, 2009. "World Oil: Market or Mayhem?," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 145-64, Summer.
  7. Yue-Hua Dai & Wen-Jie Xie & Zhi-Qiang Jiang & George J. Jiang & Wei-Xing Zhou, 2014. "Correlation structure and principal components in global crude oil market," Papers 1405.5000, arXiv.org.
  8. Li, Raymond & Leung, Guy C.K., 2011. "The integration of China into the world crude oil market since 1998," Energy Policy, Elsevier, vol. 39(9), pages 5159-5166, September.
  9. Jin, Xiaoye & Xiaowen Lin, Sharon & Tamvakis, Michael, 2012. "Volatility transmission and volatility impulse response functions in crude oil markets," Energy Economics, Elsevier, vol. 34(6), pages 2125-2134.
  10. Juan Carlos Cuestas & Paulo Jose Regis, 2008. "Nonlinearities and the order of integration of oil prices," Working Papers 2008/15, Nottingham Trent University, Nottingham Business School, Economics Division.

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