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New evidence on the relationship beetween crude oil and petroleum product prices

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Author Info
Mario Denni
G. Frewer

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Abstract

The present study aims at providing new evidence on the price re- lationships between crude oil and petroleum products. We employ single-equation error correction models (ECM) in which both changes in crude oil price and deviations from the long-run equilibrium are used to explain product price dynamics. A GARCH structure is applied to models' residuals to account for the time-varying volatility. Our key piece of innovation is the introduction of re¯ning margin e®ects to the analysis of the asymmetric products price movements. Results suggest that the overall balance in the re¯nery sector plays an important part in the adjustment to crude price shocks.

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Publisher Info
Paper provided by Department of Economics - University Roma Tre in its series Departmental Working Papers of Economics - University 'Roma Tre' with number 0061.

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Length: 48
Date of creation: Dec 2006
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Handle: RePEc:rtr:wpaper:0061

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Related research
Keywords: Oil prices; Market integration; Cointegration; Error correction models;

Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
D40 - Microeconomics - - Market Structure and Pricing - - - General
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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  14. Alessandro Lanza & M. Manera & M. Giovannini, 2003. "Oil and price dynamics in international petroleum markets," Working Paper CRENoS 200306, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
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  16. Urbain, Jean-Pierre, 1992. "On Weak Exogeneity in Error Correction Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(2), pages 187-207, May.
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    Other versions:
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