Additional information is available for the following registered author(s):

• Matteo Manera
• Alessandro Lanza

In this paper we investigate crude oil and products price dynamics. We present a comparison among ten prices series of crude oils and fourteen price series of petroleum products, considering four distinct market areas (Mediterranean, North Western Europe, Latin America and North America) over the period 1994-2002. We provide first a complete analysis of crude oil and product price dynamics using cointegration and error correction models. Subsequently we use the error correction specification to predict crude oil prices over the horizon January 2002-June 2002.The main findings of the paper can be summarized as follows: a) differences in quality are crucial to understand the behaviour of crudes; b) prices of crude oils whose physical characteristics are more similar to the marker show the following regularities: b1) they converge more rapidly to the long-run equilibrium; b2) there is an almost monotonic relation between Mean Absolute Percentage Error values and crude quality, measured by API° gravity and sulphur concentration; c) the price of the marker is the driving variable of the crude price also in the short-run, irrespective of the specific geographical area and the quality of the crude under analysis.

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Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200306.

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Date of creation: 2003
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Handle: RePEc:cns:cnscwp:200306

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Related research

Keywords: Oil prices; Product prices; Error correction models; Forecasting.;

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
D40 - Microeconomics - - Market Structure and Pricing - - - General
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

This paper has been announced in the following NEP Reports:

• NEP-ALL-2004-07-26 (All new papers)
• NEP-MIC-2004-07-26 (Microeconomics)

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This page was last updated on 2009-11-27.