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On the relationship between forward prices of crude oil and domestic fuel: A panel data cointegration approach

  • Marc Joëts

The aim of this paper is to investigate the existence of a long-term relationship between the forward prices of crude oil and domestic fuel (FOD) on the period from August 2003 to April 2010. To this end, we rely on a panel data setting by considering a sample of 36 maturities for the forward prices. Using panel cointegration tests, our results show that oil and fuel prices are characterized by a strong homogeneous long-term equilibrium relationship for several maturities. Estimating a panel error correction model, we find that FOD prices are influenced by oil prices variations on both the short and the long run. The existence of a unique equilibrium model for all maturities may have important implications for financial arbitrage strategies based on energy prices relationships, industrial product plan and calculating consumer prices.

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Article provided by CEPII research center in its journal International Economics/Economie Internationale.

Volume (Year): (2011)
Issue (Month): 126-127 ()
Pages: 39-50

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Handle: RePEc:cii:cepiei:2011-q2-3-126-127-3
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