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On the relationship between forward energy prices: a panel data cointegration approach

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  • Marc Joëts

Abstract

The aim of this paper is to investigate the long-term relationship between the forward prices of crude oil and domestic fuel (FOD) on the period from August 2003 to April 2010. To this end, we rely on a panel data setting by considering a sample of 36 maturities for the forward prices. Using panel cointegration tests, our results show that oil and fuel prices are characterized by a strong homogeneous long-term equilibrium relationship for several maturities. Estimating a panel error correction model, we find that FOD prices are influenced by oil prices variations on both the short and the long run. The existence of a unique equilibrium model for all maturities may have important implications for financial arbitrage strategies based on energy prices relationships.

Suggested Citation

  • Marc Joëts, 2010. "On the relationship between forward energy prices: a panel data cointegration approach," EconomiX Working Papers 2010-21, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2010-21
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    File URL: http://economix.fr/pdf/dt/2010/WP_EcoX_2010-21.pdf
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    References listed on IDEAS

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    1. Gjolberg, Ole & Johnsen, Thore, 1999. "Risk management in the oil industry: can information on long-run equilibrium prices be utilized?," Energy Economics, Elsevier, vol. 21(6), pages 517-527, December.
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    Cited by:

    1. Joëts, Marc & Mignon, Valérie, 2012. "On the link between forward energy prices: A nonlinear panel cointegration approach," Energy Economics, Elsevier, vol. 34(4), pages 1170-1175.

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    More about this item

    Keywords

    forward energy prices; oil; domestic fuel; panel cointegration;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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