When and how do tropical storms affect markets? The case of refined petroleum
Little is known about the magnitude of the effect of powerful tropical storms on asset prices, or when markets revise price expectations in response to such storms. Refinery clustering in the coastal northwest Gulf of Mexico provides an opportunity to examine such effects directly. We examine the effect of tropical storm forecasts on the crack spread -- the difference between refined petroleum and crude oil prices. Prices appear to reflect storm effects at the 24-h forecast horizon. Further, the magnitude is significant -- category 4 hurricanes in this region increase refined petroleum prices relative to crude oil by about 13.5%.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thomas V. Schwarz & Andrew C. Szakmary, 1994. "Price discovery in petroleum markets: Arbitrage, cointegration, and the time interval of analysis," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 14(2), pages 147-167, 04.
- Matthew S. Lewis, 2009. "Temporary Wholesale Gasoline Price Spikes Have Long-Lasting Retail Effects: The Aftermath of Hurricane Rita," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 581-605, 08.
- Amir Yaron & Leonid Kogan & Dmitry Livdan, 2004.
"Futures Prices in a Production Economy with Investment Constraints,"
2004 Meeting Papers
128, Society for Economic Dynamics.
- Leonid Kogan & Dmitry Livdan & Amir Yaron, 2005. "Futures Prices in a Production Economy with Investment Constraints," NBER Working Papers 11509, National Bureau of Economic Research, Inc.
- Kenneth A. Froot, 2001.
"The Market for Catastrophe Risk: A Clinical Examination,"
NBER Working Papers
8110, National Bureau of Economic Research, Inc.
- Froot, Kenneth A., 2001. "The market for catastrophe risk: a clinical examination," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 529-571, May.
- Kenneth A. Froot, 1999. "The Market for Catastrophe Risk: A Clinical Examination," NBER Working Papers 7286, National Bureau of Economic Research, Inc.
- Peter C.B. Phillips, 1985.
"Time Series Regression with a Unit Root,"
Cowles Foundation Discussion Papers
740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
- J. David Cummins & David Lalonde & Richard D. Phillips, 2000.
"The Basis Risk of Catastrophic-Loss Index Securities,"
Center for Financial Institutions Working Papers
00-22, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Cummins, J. David & Lalonde, David & Phillips, Richard D., 2004. "The basis risk of catastrophic-loss index securities," Journal of Financial Economics, Elsevier, vol. 71(1), pages 77-111, January.
- Anders B. Trolle & Eduardo S. Schwartz, 2009. "Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives," Review of Financial Studies, Society for Financial Studies, vol. 22(11), pages 4423-4461, November.
- Paul Berhanu Girma & Albert S. Paulson, 1998. "Seasonality in petroleum futures spreads," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 18(5), pages 581-598, 08.
- Niehaus, Greg, 2002. "The allocation of catastrophe risk," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 585-596, March.
- Dwight M. Jaffee & Thomas Russell, 1996. "Catastrophe Insurance, Capital Markets and Uninsurable Risks," Center for Financial Institutions Working Papers 96-12, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Zanjani, George, 2002. "Pricing and capital allocation in catastrophe insurance," Journal of Financial Economics, Elsevier, vol. 65(2), pages 283-305, August.
- Severin Borenstein & A. Colin Cameron, 1992.
"Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?,"
NBER Working Papers
4138, National Bureau of Economic Research, Inc.
- Severin Borenstein & A. Colin Cameron & Richard Gilbert, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 305-339.
- Leonid Kogan & Dmitry Livdan & Amir Yaron, 2009.
"Oil Futures Prices in a Production Economy with Investment Constraints,"
Journal of Finance,
American Finance Association, vol. 64(3), pages 1345-1375, 06.
- Leonid Kogan & Dmitry Livdan & Amir Yaron, 2008. "Oil Futures Prices in a Production Economy With Investment Constraints," Working Papers 0803, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Mu, Xiaoyi, 2007. "Weather, storage, and natural gas price dynamics: Fundamentals and volatility," Energy Economics, Elsevier, vol. 29(1), pages 46-63, January.
- Miltersen, Kristian R. & Schwartz, Eduardo S., 1998. "Pricing of Options on Commodity Futures with Stochastic Term Structures of Convenience Yields and Interest Rates," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(01), pages 33-59, March.
- Gregory W. Brown & Klaus Bjerre Toft, 2002. "How Firms Should Hedge," Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1283-1324.
- 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.
- Chen, Li-Hsueh & Finney, Miles & Lai, Kon S., 2005. "A threshold cointegration analysis of asymmetric price transmission from crude oil to gasoline prices," Economics Letters, Elsevier, vol. 89(2), pages 233-239, November.
- Roll, Richard, 1984. "Orange Juice and Weather," American Economic Review, American Economic Association, vol. 74(5), pages 861-80, December.
- Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, May.
- Mark J. Garmaise & Tobias J. Moskowitz, 2009. "Catastrophic Risk and Credit Markets," Journal of Finance, American Finance Association, vol. 64(2), pages 657-707, 04.
- Litzenberger, Robert H & Rabinowitz, Nir, 1995. " Backwardation in Oil Futures Markets: Theory and Empirical Evidence," Journal of Finance, American Finance Association, vol. 50(5), pages 1517-45, December.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:32:y:2010:i:6:p:1283-1290. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.