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Crucial relationship among energy commodity prices

Author

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  • Cristina Bencivenga
  • Giulia Sargenti

    () (Department of Economic Theory and Quantitative Methods for Political Choices,Sapienza University of Rome,)

Abstract

This study investigates the short and long run relationship between crude oil, natural gas and electricity prices in US and in European commodity markets. The relationship between energy commodities may have several implications for the pricing of derivative products and for risk management purposes. Using daily price data over the period 2001-2009 we perform a correlation analysis to study the short run relationship, while the long run relationship is analyzed using a cointegration framework. The results show an erratic relationship in the short run while in the long run an equilibrium may be identi ed having di erent features for the European and the US markets.

Suggested Citation

  • Cristina Bencivenga & Giulia Sargenti, 2010. "Crucial relationship among energy commodity prices," Working Papers 5, Doctoral School of Economics, Sapienza University of Rome, revised 2010.
  • Handle: RePEc:dsc:wpaper:5
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    File URL: http://phdschool-economics.dse.uniroma1.it/website/workingpapers/bencivengaWP5.pdf
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    References listed on IDEAS

    as
    1. Lance J. Bachmeier & James M. Griffin, 2006. "Testing for Market Integration: Crude Oil, Coal, and Natural Gas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 55-72.
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    4. Apostolos Serletis & John Herbert, 2007. "The Message in North American Energy Prices," World Scientific Book Chapters,in: Quantitative And Empirical Analysis Of Energy Markets, chapter 13, pages 156-171 World Scientific Publishing Co. Pte. Ltd..
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    6. Mohammadi, Hassan, 2009. "Electricity prices and fuel costs: Long-run relations and short-run dynamics," Energy Economics, Elsevier, vol. 31(3), pages 503-509, May.
    7. Hansen, Bruce E., 1992. "Efficient estimation and testing of cointegrating vectors in the presence of deterministic trends," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 87-121.
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    9. Frank Asche & Petter Osmundsen & Maria Sandsmark, 2006. "The UK Market for Natural Gas, Oil and Electricity: Are the Prices Decoupled?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 27-40.
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    Cited by:

    1. García-Martos, Carolina & Rodríguez, Julio & Sánchez, María Jesús, 2013. "Modelling and forecasting fossil fuels, CO2 and electricity prices and their volatilities," Applied Energy, Elsevier, pages 363-375.
    2. Böckers, Veit & Heimeshoff, Ulrich, 2014. "The extent of European power markets," Energy Economics, Elsevier, vol. 46(C), pages 102-111.

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    Keywords

    Energy; commodities; prices.;

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