Are the Prices of Light Diesel Oil, Gasoline, CNG and Kerosene Oil Co-Integrated?
The vibration of fuel prices in the energy market of Pakistan has sprung to huge extent. From the economic perspective of any nation’s monetary uplifting, the government’s view can be achieved via increasing the fuel/ energy prices but such measures always disturbs to discontented civilians of the same salaries who are liable to pay increased taxes. Daily prices of four major sources of energy including gasoline, diesel, kerosene and compressed natural gas (CNG) for the period of April 2006 to May 2011 have been investigated for checking the co-movements among them. Unit Root Test discloses that the prices are non-stationary at same order. While the Johansen Co-integration test shows that the prices of all the four energy products are co- integrated with each other. This is in contrast to the artificial situations as the Pakistani government exercises artificial pricing movements of specific oil over the other.
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