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Business Cycles and the Behavior of Energy Prices

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  • Apostolos Serletis
  • Vaughn Hulleman

Abstract

This paper tests the theory of storage—the hypothesis that the marginal convenience yield on inventory falls at a decreasing rate as inventory increases in energy markets (crude oil, heating oil, and unleaded gas markets). We use the Fama and French (1988) indirect test, based on the relative variation in spot and futures prices. The results suggest that the theory holds for the energy markets.

Suggested Citation

  • Apostolos Serletis & Vaughn Hulleman, 1994. "Business Cycles and the Behavior of Energy Prices," The Energy Journal, , vol. 15(2), pages 125-134, April.
    • Handle: RePEc:sae:enejou:v:15:y:1994:i:2:p:125-134
    DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No2-7
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    References listed on IDEAS

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    1. Apostolos Serletis, 2007. "Rational Expectations, Risk, and Efficiency in Energy Futures Markets," World Scientific Book Chapters, in: Quantitative And Empirical Analysis Of Energy Markets, chapter 2, pages 15-22, World Scientific Publishing Co. Pte. Ltd..
    2. French, Kenneth R, 1986. "Detecting Spot Price Forecasts in Futures Prices," The Journal of Business, University of Chicago Press, vol. 59(2), pages 39-54, April.
    3. Lester G. Telser, 1958. "Futures Trading and the Storage of Cotton and Wheat," Journal of Political Economy, University of Chicago Press, vol. 66(3), pages 233-233.
    4. Fama, Eugene F., 1984. "Forward and spot exchange rates," Journal of Monetary Economics, Elsevier, vol. 14(3), pages 319-338, November.
    5. repec:bla:jfinan:v:43:y:1988:i:5:p:1075-93 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Apostolos Serletis & Asghar Shahmoradi, 2007. "Futures Trading and the Storage of North American Natural Gas," World Scientific Book Chapters, in: Quantitative And Empirical Analysis Of Energy Markets, chapter 8, pages 82-87, World Scientific Publishing Co. Pte. Ltd..
    2. Maryam Ahmadi & Niaz Bashiri Behmiri & Matteo Manera, 2020. "The theory of storage in the crude oil futures market, the role of financial conditions," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(7), pages 1160-1175, July.
    3. Brajesh Kumar, 2016. "Asymmetric Volatility of Net Convenience Yield: Evidence from Indian Commodity Futures Markets," Proceedings of Economics and Finance Conferences 3205752, International Institute of Social and Economic Sciences.
    4. Fernandez-Perez, Adrian & Fuertes, Ana-Maria & Miffre, Joelle, 2021. "The risk premia of energy futures," Energy Economics, Elsevier, vol. 102(C).
    5. Niaz Bashiri Behmiri, Maryam Ahmadi, Juha-Pekka Junttila, and Matteo Manera, 2021. "Financial Stress and Basis in Energy Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    6. Gkillas, Konstantinos & Manickavasagam, Jeevananthan & Visalakshmi, S., 2022. "Effects of fundamentals, geopolitical risk and expectations factors on crude oil prices," Resources Policy, Elsevier, vol. 78(C).
    7. Oleg Kucher & Alexander Kurov, 2014. "Business cycle, storage, and energy prices," Review of Financial Economics, John Wiley & Sons, vol. 23(4), pages 217-226, November.
    8. Thoma, Mark, 2004. "Electrical energy usage over the business cycle," Energy Economics, Elsevier, vol. 26(3), pages 463-485, May.

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    More about this item

    Keywords

    Business cycles; Energy price behavior; Storage; NYMEX; spot prices; futures prices;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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