Breaks,trends, and unit roots in spot prices for crude oil and petroleum products |
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| Affiliation: | 1. School of Economics, Central University of Finance and Economics, 39 South College Rd., Beijing 10081, China;2. School of Economics, Renmin University of China, 59 Zhongguancun St., Beijing 100872, China;1. School of Economics, Renmin University of China, 59 Zhongguancun Street, Beijing 100872, PR China;2. Central University of Finance and Economics, 39 South College Road, Beijing 100081, PR China;1. College of Public Administration, Nanjing Agricultural University, Nanjing 210095, China;2. Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing 100101, China;3. School of Remote Sensing, Nanjing University of Information Science and Technology, Nanjing 210044, China |
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| Abstract: | This study examines the trend properties in energy price series using weekly spot price data for crude oil, heating oil, and regular gasoline. In particular, the procedures proposed by Perron and Yabu (2009b) are employed to test for a one-time break in the trend function of each price series with no prior knowledge of whether the noise component is stationary or has an autoregressive unit root. Based on the results of the break estimate, the unit root test developed by Kim and Perron (2009) is performed to examine the stationarity of the prices. Finally, we extend the one-break analysis to the case with multiple breaks by employing the break test proposed by Kejriwal and Perron (2010) and the unit root test of Carrion-i-Silvestre et al. (2009). The results consistently demonstrate evidence of structural breaks and reject the unit root null hypothesis for all the price series, suggesting that energy prices are persistently influenced by long-term economic fundamentals instead of temporal policy changes. |
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