Refining for export and the convergence of petroleum product prices

Armando Zavaleta, W. Walls and Frank W. Rusco

Energy Economics, 2015, vol. 47, issue C, 206-214

Abstract: The petroleum refining industry has changed over the past decades from one in which capacity primarily served local and regional markets to one in which trade in refined petroleum products has become more widespread. We investigate the hypothesis of increasing globalization by examining the convergence of prices for refined products across different markets. Using data on refined products from market centers in the US and Europe, we test for convergence of prices using standard time-series techniques. The data plainly show that markets for refined petroleum products have become more interrelated as Europe exported its gasoline surplus and global demand for petroleum products approached refining capacity. Econometric evidence supports the hypothesis that the US and European markets for oil and refined products are integrated. We find evidence that a structural break during the financial crisis of 2008 changed the long-run equilibrium price relationships and the short-run price dynamics. Refined product markets are likely to experience continued globalization given trends in the United States and Europe and because of key export-oriented refining capacity investments made to take advantage of access to specific crude oil sources.

Keywords: Refined product markets; Price convergence; Petroleum refining (search for similar items in EconPapers)
JEL-codes: F1 L11 L71 M2 Q31 Q41 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Refining for Export and the Convergence of Petroleum Product Prices (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:47:y:2015:i:c:p:206-214

DOI: 10.1016/j.eneco.2014.11.007

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