Are Petroleum Futures Prices Good Predictors of Cash Prices

摘要

This report presents a statistical analysis of the use of heating oil futures prices to predict heating oil cash prices. The data are based on futures prices quotes appearing in the final sections of major daily newspapers such as the Wall Street Journal, and monthly cash prices published by the Energy Information Administration (EIA). In general, the question posed by the title of this report can be answered by a qualified ''yes,'' but only when using the very near term futures prices, and only when predicting very near term forecasts and estimating preliminary data. The major findings of this research can be summarized as follows: Using 1-month-out futures prices to estimate current price data provides generally good results. Futures prices more than 1 month out do not significantly add to this estimation procedure. In both ''cost passthrough'' and market equilibrium price models, again only the 1-month-out futures price adds significantly to the predictive power of the equations. Polynomial distributed lag models estimated with futures prices up to 6 months out are slighly more likely to display significant results for the more distant futures prices than the traditional regression models. (ERA citation 12:010866)