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The Relationship between Crude and Refined Product Market: The Case of Singapore Gasoline Market using MOPS Data

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  • Rao, Gyaneshwar

Abstract

Economic theory suggests that refined and crude oil prices should be interrelated as the refined products are a derivative of the crude product and hence the prices of the two categories must have a long run relationship. However any short term feedbacks between the two markets are also of interest. Any feedbacks which are significant between the markets will greatly improve our understanding of how the complex oil markets work and that the workings of both the markets are not as independent as some would want to believe. The Johansen and Julius VCEM technique and Granger causality tests using co-integrating methodology show there is a basis to conclude that there is a uni-directional causality running from crude market to the refined product market, confirming a long run relationship between the markets.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7579.

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Date of creation: 09 Mar 2008
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Handle: RePEc:pra:mprapa:7579

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Keywords: Crude Prices; Refined Prices; Long Run Relationship; Granger causality; Mean of Platts (MOPS);

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  1. Lance J. Bachmeier & James M. Griffin, 2003. "New Evidence on Asymmetric Gasoline Price Responses," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 772-776, August.
  2. B Bhaskara Rao & Gyaneshwar Rao, 2005. "Crude Oil and Gasoline Prices in Fiji: Is the Relationship Asymmetric?," Microeconomics 0510004, EconWPA.
  3. Borenstein, Severin & Cameron, A Colin & Gilbert, Richard, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 305-39, February.
  4. B Bhaskara Rao & Gyaneshwar Rao, 2006. "The Rockets And Feathers Hypothesis: An Application To Gasoline Prices In Fiji," The IUP Journal of Applied Economics, IUP Publications, vol. 0(5), pages 67-71, September.
  5. Bacon, Robert W., 1991. "Rockets and feathers: the asymmetric speed of adjustment of UK retail gasoline prices to cost changes," Energy Economics, Elsevier, vol. 13(3), pages 211-218, July.
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