Dependence structure between the international crude oil market and the European markets of biodiesel and rapeseed oil

Muhammad Yahya, Anupam Dutta, Elie Bouri, Christoffer Wadström and Gazi Uddin

Renewable Energy, 2022, vol. 197, issue C, 594-605

Abstract: Being an environmentally friendly fuel obtained from rapeseed oil, biodiesel is used extensively in Europe. However, the dependence structure between global crude oil prices and the European prices of biodiesel and rapeseed oil is understudied and unclear. In this paper, we address this gap by utilizing asymmetric copulas and cross-quantilogram approaches on daily data. The results of the DCC-Student-t copula indicate that during bearish periods the conditional connectedness between crude oil prices and biodiesel (rapeseed oil) prices are stronger than during bullish periods, indicating increased co-movement with a decline in crude oil prices. The application of cross-quantilogram indicates that an increase in crude oil price positively influences biodiesel prices reflecting an asymmetric dependence structure among the assets. There is evidence of shifts in the dynamics of quantile dependency during periods of financial and economic turmoil. Overall, the results show a significant dependence between the global crude oil market and the European markets of biodiesel and rapeseed oil in specific periods and under specific market conditions, which have important implications for policymakers and investors.

Keywords: Crude oil; Biodiesel; Rapeseed oil; Europe; Copula dynamic correlations; Cross quantile dependence (search for similar items in EconPapers)
JEL-codes: C22 C32 Q16 Q21 Q31 Q42 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:197:y:2022:i:c:p:594-605

DOI: 10.1016/j.renene.2022.07.112

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