Do Heating Oil Prices Adjust Asymmetrically To Changes In Crude Oil Prices

Abstract

This study investigated if there is an asymmetric relationships between heating oil and crude oil futures price changes for maturities of one to four months. The study finds that heating oil and crude oil futures price series of one-month to four month maturities are threshold cointegrated. The study also shows that heating oil and crude oil futures prices adjust "Asymmetrically" for deviation from equilibrium. At shorter maturities (one and two month contracts) heating oil and crude oil prices adjust faster for positive deviation from threshold equilibrium. In contrast, for longer maturities (three and four month contracts) heating oil and crude oil prices adjust faster for negative deviation from equilibrium. Finally, this study finds that only heating oil prices adjust to clear deviations from long-run equilibrium relationship.

Analysis of the Dynamic Evolutionary Behavior of American Heating Oil Spot and Futures Price Fluctuation Networks

“…Thus, we can see that the intermediary capacity of network nodes is declining in the stable fluctuation period; (2) Whether it is in the overall network or local network concerning HSPFN and HFPFN, there is no symbol "s" for the first five nodes with the largest betweenness, suggesting that the drastic changes in the futures and spot prices often have a relatively strong intermediary ability in the long-term heating oil market; (3) Both of the two kinds of price fluctuation network of heating oil show that the main mediating function is borne by the node with small strength, revealing from the side that the important node is not necessarily the node with large strength. When these nodes with a higher betweeness centrality turn up, it suggests that this period is a transitional stage, and reflects the alternation of changes in price volatility along with the precursors of change.…”

“…As EIA (U.S. Energy Information Administration) reported, there are about six million households in the United States using heating oil as their main heating fuel at present, and mostly used in the northeastern United States. Heating oil is refined from crude oil at a 25% yield, thus its prices are generally closely related to fluctuations in crude oil prices [1,2], also depending on the amount of fuel purchased. Unlike natural gas which is purchased on demand, heating oil must be purchased in advance, and usually with a large amount, which has brought a considerable burden to lots of American families.…”