Cointegration in the Oil Market Among Regional Blends

Authors

  • Neil A. Wilmot University of Minnesota Duluth

Abstract

The integration of crude oil spot prices, from different geographic regions is examined using the residual-based cointegration test of Gregory and Hansen (1996), which allows for endogenously determined structural breaks. While traditionally, the focus has been on three global benchmark crudes (WTI, Brent and Dubai Fateh), herein the relationship among secondary, regional blends (Edmonton Par, Western Canadian Select, Bonny Light and Mexican Maya) is examined with implications for the ‘global pool’ hypothesis. Monthly data is examined, with particular emphasis placed on the Canadian perspective. The results indicate that the regional crudes, of similar and differing grades, are cointegrated with a structural break. Events with a direct impact on the crude market are linked to the structural breaks. Indirect impacts are attributed to events which appear to have affected crude oil prices via a decrease in demand, such as the economic uncertainty leading to and during the ‘Great Recession’.   Keywords: Spot prices; cointegration; structural breaks JEL Classifications: C22; Q4

Downloads

Download data is not yet available.

Author Biography

Neil A. Wilmot, University of Minnesota Duluth

Department of EconomicsAssistant Professor

Downloads

Published

2013-09-25

How to Cite

Wilmot, N. A. (2013). Cointegration in the Oil Market Among Regional Blends. International Journal of Energy Economics and Policy, 3(4), 424–433. Retrieved from https://econjournals.org.tr/index.php/ijeep/article/view/592

Issue

Vol. 3 No. 4 (2013)

Section

Articles

License

Submission of an article implies that the work described has not been published previously , that it is not under consideration for publication elsewhere, that its publication is approved by all authors and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, will not be published elsewhere in the same form, without the written consent of the Publisher. The Editors reserve the right to edit or otherwise alter all contributions, but authors will receive proofs for approval before publication.