Causality in crude oil prices

Szymon Wlazlowski, Björn Hagströmer, Monica Giulietti*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Crude oil markets witness growing disparity between the quality of crudes supplied and demanded in the market. The market share of low-quality crudes is increasing due to the depletion of old fields and increasing demand. This is unnerving the practitioners and affecting the relevance of the traditional benchmark crudes due to the lack of lower quality benchmarks (Montepeque, 2005). In this article, we apply Granger causality tests to study the price dependence of 32 crudes in order to establish which crudes drive other prices and which ones simply follow general market trends. Our results indicate that some of the old benchmarks are still relevant while others can be disregarded. Our results also interestingly show that the low-quality Mediterranean Russian Urals crude, introduced in the late 1990s, has emerged recently as a significant driver of global prices.

Original languageEnglish
Pages (from-to)3337-3347
Number of pages11
JournalApplied Economics
Volume43
Issue number24
Early online date14 Oct 2010
DOIs
Publication statusPublished - 2011

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