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New evidence on the relationship beetween crude oil and petroleum product prices

Mario Denni () and G. Frewer

No 61, Departmental Working Papers of Economics - University 'Roma Tre' from Department of Economics - University Roma Tre

Abstract: The present study aims at providing new evidence on the price re- lationships between crude oil and petroleum products. We employ single-equation error correction models (ECM) in which both changes in crude oil price and deviations from the long-run equilibrium are used to explain product price dynamics. A GARCH structure is applied to models' residuals to account for the time-varying volatility. Our key piece of innovation is the introduction of re¯ning margin e®ects to the analysis of the asymmetric products price movements. Results suggest that the overall balance in the re¯nery sector plays an important part in the adjustment to crude price shocks.

Keywords: Oil prices; Market integration; Cointegration; Error correction models (search for similar items in EconPapers)
JEL-codes: E32 C22 D40 Q40 (search for similar items in EconPapers)
Pages: 48
Date: 2006-12
New Economics Papers: this item is included in nep-ene and nep-mac
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