Price Dynamic, Volatility and Information Flows in the Oil Industry: A Multivariate Analysis

31 Pages Posted: 8 Nov 2011 Last revised: 3 Nov 2014

See all articles by Alessandro Mauro

Alessandro Mauro

MKS; University of Geneva - Geneva School of Economics and Management

Andrea Peri

British Petroleum

Date Written: November 1, 2011

Abstract

The relationships between crude and product prices are crucial throughout oil markets and especially so within the refining industry, where they define the refinery margin between cost of inputs (crudes) and value of outputs (products). The oil market is global but regional factors are also relevant, creating local variations in crude / product relationships. These relationships are often ambiguous, with limited in depth study to date. It is important to test and understand if there are feedback mechanisms from product to crude markets in the short run, investigating, in particular, weather shocks affecting the former also affect the latter. Consequently, the findings of this paper present relevant issues for oil market participants and their management of price risk.

Keywords: crude oil markets, refined product markets, petroleum markets, GARCH, Multivariate GARCH, MGARCH, BEKK, Cointegration, VECM, Granger causality, Weakly Exogenity, volatility transmission

JEL Classification: C22, E32, G13, G14, G17, G32, Q40, Q49

Suggested Citation

Mauro, Alessandro and Peri, Andrea, Price Dynamic, Volatility and Information Flows in the Oil Industry: A Multivariate Analysis (November 1, 2011). Available at SSRN: https://ssrn.com/abstract=1956582 or http://dx.doi.org/10.2139/ssrn.1956582

University of Geneva - Geneva School of Economics and Management ( email )

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Bd du Pont-d'Arve 40
Geneva, 1211
Switzerland

Andrea Peri (Contact Author)

British Petroleum ( email )

London
United Kingdom

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