Can Crude Oil Futures Predict Spot Retail Unleaded Gasoline Prices?
Journal of Business Strategies, 26(2), 115-135, 2009
26 Pages Posted: 5 Sep 2012 Last revised: 3 Sep 2017
Date Written: September 4, 2012
The motivation for this paper began with casual empiricisms regarding the brief distributed lag of retail gasoline prices behind crude oil futures. We developed a model consistent with our hypothesis and tested it with econometrics using statistical data that include the sharp decrease in crude oil price futures in late summer 2008. We found that our model is a consistent and efficient estimator of the actual gasoline prices over most of our sample period. However, random shocks to gasoline prices, like Hurricane Ike in 2008, cause the model to have problems accurately predicting gas prices. We conclude that our estimated model and simulations provide reasonable support for our hypothesis that crude oil price futures can predict spot retail unleaded gasoline prices.
Keywords: Crude Oil Futures, Retail Gasoline Price, Forecasting
JEL Classification: E17, Q40
Suggested Citation: Suggested Citation