Alaska North Slope crude oil price and the behavior of diesel prices in California

摘要

In this paper we analyze the price dynamics of Alaska North Slope crude oil and L.A. diesel fuel prices. We employ CAR methodology and bivariate GARCH model to show that there is a strong evidence of a uni-directional causal relationship between the two prices. The L.A. diesel market is found to bear the majority of the burden of convergence when There is a price spread. This finding may be seen as being consistent with the general Consensus that price discovery emanates from the larger, more liquid market where trading Volume is concentrated.