Oil Costs and Prices: An Empirical Causality Analysis

Authors

Abstract

This study analyzes the causal relationship between oil prices and production costs and their implication over hedging in production companies. Two different data sets have been used as a proxy for production costs: i) monthly product price index related to oil activities from the Bureau of Labour of Statistics; ii) yearly data obtained from reports of publicly traded oil companies. For the oil price, different future contracts of Brent (1M, 12M, 24M, 60M) have been explored. Based on Granger's definition of causality, and using the Toda-Yamamoto (1995) methodology, both causal directions have been tested. The results obtained indicate that oil prices (any term of the curve) Granger-cause production costs, and not the other way around (as it has been considered for many specialists) in any term of the curve.Keywords: Oil Price, Production Costs, Hedging, Granger Causality, Toda-Yamamoto JEL Classifications: Q41, Q47DOI: https://doi.org/10.32479/ijeep.10887

Downloads

Download data is not yet available.

Downloads

Additional Files

Published

2021-04-10

How to Cite

Moreno Alonso, P., & Muñoz San Roque, A. (2021). Oil Costs and Prices: An Empirical Causality Analysis. International Journal of Energy Economics and Policy, 11(3), 546–554. Retrieved from https://mail.econjournals.com/index.php/ijeep/article/view/10887

Issue

Vol. 11 No. 3 (2021)

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and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, will not be published elsewhere in the same form, without the written consent of the Publisher.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.