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Issue Q2-3 2011  
On the relationship between forward prices of crude oil and domestic fuel: A panel data cointegration approach  
Marc Joëts
The aim of this paper is to investigate the existence of a 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, industrial product plan and calculating consumer prices. Abstract

ENERGY ; Forward Energy Prices ; Oil ; Domestic Fuel ; Panel Cointegration ; Keywords
c23 ; q40 ; JEL classification
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