Breaks, trends, and unit roots in spot prices for crude oil and petroleum products

Jingwei Sun and Wendong Shi

Energy Economics, 2015, vol. 50, issue C, 169-177

Abstract: This study examines the trend properties in energy price series using weekly spot price data for crude oil, heating oil, and regular gasoline. In particular, the procedures proposed by Perron and Yabu (2009b) are employed to test for a one-time break in the trend function of each price series with no prior knowledge of whether the noise component is stationary or has an autoregressive unit root. Based on the results of the break estimate, the unit root test developed by Kim and Perron (2009) is performed to examine the stationarity of the prices. Finally, we extend the one-break analysis to the case with multiple breaks by employing the break test proposed by Kejriwal and Perron (2010) and the unit root test of Carrion-i-Silvestre et al. (2009). The results consistently demonstrate evidence of structural breaks and reject the unit root null hypothesis for all the price series, suggesting that energy prices are persistently influenced by long-term economic fundamentals instead of temporal policy changes.

Keywords: Structural break; Unit root; Trend; Crude oil; Petroleum products (search for similar items in EconPapers)
JEL-codes: C4 C5 Q4 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:50:y:2015:i:c:p:169-177

DOI: 10.1016/j.eneco.2015.05.001

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