Title: Examining the nature of the relationship between Tapis crude oil and Singapore petrol prices

Authors: Abbas Valadkhani; Martin O'Brien; Amir Arjomandi

Addresses: UNE Business School, University of New England, NSW 2351, Armidale, Australia ' School of Economics, University of Wollongong, NSW 2522, Australia ' School of Economics, University of Wollongong, NSW 2522, Australia

Abstract: Fuel prices play a crucial role in the supply side of many economies across the globe. Hence, it is important to ensure that fuel pricing is efficient and free from any asymmetric behaviour. This paper examines the long- and short-run relationships between the price of unleaded petrol in Singapore (Mogas95) and the price of Tapis crude oil using 4,929 daily observations (4 June 1993-25 April 2012). As expected, we found that these two key energy indicators are cointegrated. We then developed a modelling framework that allowed us to test for adjustment asymmetries that distinguish between the size and sign of disequilibria, proxied by three different error correction terms. We found no significant evidence of any asymmetric pricing behaviour and market inefficiency. However, our results revealed a significant weekly cyclical pattern, with petrol being more expensive on Thursdays/Fridays than the rest of the week.

Keywords: unleaded petrol; Tapis crude oil; asymmetric behaviour; energy prices; Singapore; petrol prices; fuel prices; fuel pricing; modelling; asymmetric pricing; market inefficiency; weekly cyclical patterns.

DOI: 10.1504/IJGEI.2013.055938

International Journal of Global Energy Issues, 2013 Vol.36 No.1, pp.27 - 41

Received: 06 Nov 2012
Accepted: 04 Mar 2013
Published online: 12 Jul 2014 *

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