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Oil and Product Price Dynamics in International Petroleum Markets

Alessandro Lanza, Matteo Manera and Massimo Giovannini NOTA DI LAVORO 81.2003

SEPTEMBER 2003 IEM International Energy Markets

Alessandro Lanza, Eni S.p.A., Roma, Fondazione Eni Enrico Mattei, Milano and CRENoS, Cagliari, Italy Matteo Manera, Department of Statistics, University of Milano-Bicocca, Italy and Fondazione Eni Enrico Mattei, Milano, Italy Massimo Giovannini, Fondazione Eni Enrico Mattei, Milano, Italy

This paper can be downloaded without charge at: The Fondazione Eni Enrico Mattei Note di Lavoro Series Index: http://www.feem.it/web/activ/_wp.html Social Science Research Network Electronic Paper Collection: http://ssrn.com/abstract=464760

The opinions expressed in this paper do not necessarily reflect the position of Fondazione Eni Enrico Mattei

Oil and Product Price Dynamics in International Petroleum Markets


Summary In this paper we investigate crude oil and products price dynamics. We present a comparison among ten price series of crude oils and fourteen price series of petroleum products, considering four distinct market areas (Mediterranean, North Western Europe, Latin America and North America) over the period 1994-2002. We provide first a complete analysis of crude oil and product price dynamics using cointegration and error correction models. Subsequently we use the error correction specification to predict crude oil prices over the horizon January 2002-June 2002.The main findings of the paper can be summarized as follows: a) differences in quality are crucial to understand the behaviour of crudes; b) prices of crude oils whose physical characteristics are more similar to the marker show the following regularities: b1) they converge more rapidly to the long-run equilibrium; b2) there is an almost monotonic relation between Mean Absolute Percentage Error values and crude quality, measured by API gravity and sulphur concentration; c) the price of the marker is the driving variable of the crude price also in the short-run, irrespective of the specific geographical area and the quality of the crude under analysis. Keywords: Oil prices, Product prices, Error correction models, Forecasting JEL: C22, D40, E32 The authors would like to thank Luigi Buzzacchi, Marzio Galeotti, Margherita Grasso and Micheal McAleer for helpful comments. Roberto Asti and Cristiana Boschi provided excellent editorial assistance. This study does not necessarily reflect the views of Eni S.p.A.. Address for correspondence: Alessandro Lanza Fondazione Eni Enrico Mattei Corso Magenta, 63 20123 Milano Italy Phone: +39-02-52036930 Fax: +39-02-52036946 E-mail: alessandro.lanza@feem.it

Oil and Product Price Dynamics in International Petroleum Markets


(Revised: 31 July 2003) 1. Introduction

Over the last 30 years, oil prices have been closely scrutinized by applied economic literature. Literally hundreds of applied research and policy studies have examined the role played by oil prices in determining economic growth or inflation rates, both in developed and developing countries. Recently, several studies have contributed to this literature by examining the relation between the price of crude oil and refinery products. If we exclude the specialized literature, however, much less attention has been given to understanding the price dynamics for different crudes, even if the quality of crude oils available to refiners (and consequently their prices) is a critical factor in the strategies employed by refiners around the world. Oil is not a homogenous commodity: as a number of experts have pointed out (see, The International Crude Oil Market Handbook, 2001) there are over 160 different internationally traded crude oils, all of which vary in terms of characteristics, quality, and market penetration. Crude oils are classified by density and sulphur content. Lighter crudes generally have a higher share of light hydrocarbons i.e. higher value products - that can be produced by simple distillation. Heavier crude oils give a greater share of lower-valued products through simple distillation and require additional processing to produce the

desired range of products. Some crude oils also have a higher sulphur content, an undesirable characteristic in terms of both processing and product quality. The quality of the crude oil determines the level of processing and re-processing necessary to achieve the optimal mix of product output. As a result, price and price differentials between crude oils also reflect the relative ease of refining. For example, a premium crude oil like West Texas Intermediate (WTI), the U.S. benchmark, or Brent, the European benchmark, have a relatively high natural yield of desirable Gasoline. In contrast, almost half of the simple distillation yield from Urals is a heavy residue that must be reprocessed or sold at a discount as crude oil. Refiners are in competition for an optimal mix of crudes for their refineries, in line with the technology of the particular refinery, the desired output mix and, more important, the relative price of available crudes. In recent years, refiners have been faced with two opposing forces: a combination of consumers' desires for lower prices and government regulations specifying increasingly lighter products of higher quality (the most difficult to produce) and supplies of crude oil that are increasingly heavier, i.e. with higher sulphur content (the most difficult to refine). The importance of identifying the way in which a given crude is linked to a specific crude benchmark comes directly from market considerations: the pressure of falling margins in the oil products market, combined with some degree of flexibility in supply decisions, obliges refiners to seek opportunities in the free market to improve their profits. Crudes are expected to continue to become heavier with higher sulphur content, while environmental restrictions are expected to significantly reduce the demand for high-sulphur content fuels. As a consequence, light sweet crudes will continue to be available and in even greater demand than today. This is why an understanding of the

price dynamics, and the role played by different crudes, is crucial for the modern oil industry. Because there are so many different varieties and grades of crude oil, buyers and sellers have found it easier to refer to a limited number of reference, or benchmark, crude oils. Other varieties are then priced at a discount or premium, according to their quality. For any given crude oil, the price is considered to be linked to another crude oil price (usually referred to as the marker). In this very simple scheme, to understand the behaviour of a given crude oil would be sufficient to explain the behaviour of its marker. However, the price difference between these two crudes is non-constant over time. To enrich the relations it is necessary to include variables other than the price marker to explain the oil price dynamics of the given crude. In principle, several variables could affect this relation and could be used as explanatory variables. Considering data availability, the common assumption is that imbalances in the petroleum product price could reflect most of these missed variables. For example: if, due to extraordinary seasonal factors, Gasoline demand were higher than expected, this would be reflected into the relations between crudes according to various specific characteristics. This approach has been examined in several different papers. However the specific economic literature on this issue is not very large. Adrangi, Chatrath, Raffiee and Ripple (2001) analyze the price dynamics of a specific crude (the Alaska North Slope) and its relation with US West coast diesel fuel price using a VAR methodology and a bivariate GARCH model to show the casual relationship between the two prices. Asche, Gjolberg and Volker (2003) make use of multivariate framework to test whether

there is a long-term relationship between crude oil and refined product prices in the North Western Europe market. Gjlberg and Johnsen (1999) analyze co-movements between the prices of crude oil and major refined products during the period 1992-98. Specifically, they explore the existence of long-run equilibrium price relationships, and whether deviations from the estimated equilibrium can be utilized for predictions of short-term price changes and for risk management. In this paper we present a comparison among crudes considering four distinct market areas (Mediterranean, North Western Europe, Latin America and North America) on ten prices series of crude oils and on fourteen price series of petroleum products. We provide first a complete analysis of crude oil and product price dynamics using co-integration and error correction models over the period 1994-2002. Subsequently we use the error correction specification to predict crude oil prices over the horizon January 2002-June 2002. The main findings of the paper can be summarized as follows. Differences in quality are crucial to understand the behaviour of crudes. Prices of crude oils whose physical characteristics are more similar to the marker show the following regularities: a) they converge more rapidly to the long-run equilibrium. b) there is an almost monotonic relation between Mean Absolute Percentage Error values and crude quality, measured by API gravity and sulphur concentration. This evidence can be motivated by considering the presence of the marker as an

explanatory variable: the closer the crude to the marker, the higher the contribution of the latter in explaining and predicting the former. The price of the marker is the driving variable of the crude price also in the shortrun, irrespective of the specific geographical area and the quality of the crude under analysis. This paper is organized as follows. Section 2 provides a description of the analyzed data. Section 3 discusses the econometric methods and models. In Section 4 the empirical results are reported and commented. The forecasting performance of the estimated models is illustrated in Section 5. Concluding remarks close the paper.

2. Data description

Our analysis is based on ten prices series of crude oils and on fourteen price series of petroleum products. These data cover four distinct market areas: Mediterranean (MED), North Western Europe (NWE), Latin America (LA) and North America (NA). In the first two areas the reference price for crude oil (marker) is represented by Brent, while for the remaining two areas the benchmark crude is WTI. The petroleum products we are considering belong to three different quality categories: unleaded Gasoline, Gasoil and Fuel oil. Within the last class we distinguish between high sulphur Fuel oil (HSFO) and low sulphur Fuel Oil (LSFO). The data frequency is weekly with the exception of the LA market, where only monthly data are available, while the sample covers the period 1994-2002. All crude oil prices are expressed in US$ per barrel, whilst product prices are in US$ per metric ton. More details on the dataset are provided in Table 1. Table 2 and Table 3 report, for both crude oils and petroleum products, the coefficients of variation of price levels and the annualized standard deviation of price

changes. On average, the coefficients of variation for crude prices are the double of the coefficients of variation of product prices, suggesting that the behaviour of crude prices is very close to that of financial assets. Moreover, if we look at the two groups separately, we find an inverse relation between quality (measured by API gravity) and the coefficient of variation. A possible interpretation is the subsidiary role played by heavy crudes when light crudes become too expensive, while the lower-quality products are more volatile since their price is intimately linked to the price of some specific substitutes (e.g. natural gas). Table 4 shows the percentage price correlations within crudes and between crudes and products. Higher correlations occur when crudes and products similar in terms of API gravity are analyzed. The evidence from Tables 3 and 4 should suggest that prices characterized by more similar coefficients of variation (i.e. light crudes and heavy products) are more correlated. However, the coefficient of variation is a measure of long-run volatility, whereas price change correlation captures short-run movements in price variations. Moreover, an increase in the demand of light products has the effect of increasing the supply of both high-quality and low-quality products (see Gjolberg and Johnsen, 1999). Such considerations justify the presence of higher correlation between light (heavy) crudes and the top (bottom) of the barrel.

3. Model specification

Crude oil and product prices dynamics can be modelled with an AutoregressiveDistributed Lag (ADL) specification:

( L ) ptc = + ( L ) ptm + ( L ) pty + ( L ) pty + ut


1 2

(1)

where L is the lag operator, ( L ) = 1 1 L ... P LP , ( L ) = 0 + 1 L + ... + Q LQ ,

( L ) = 0 + 1L + ... + R LR and ( L ) = 0 + 1L + ... + S LS . Capital letters P, Q, R and S


represent the optimal number of lags of the polynomials (L), (L), (L) and (L), respectively. With ptc we indicate the price of the selected crude, whereas ptm is the price of the marker associated with ptc , and ptyi , i=1,2, are the prices of two products;
ut is a white noise process. All variables are log-transformed.

Recent developments in time series econometrics suggest that the first step towards the estimation of model (1) is to check whether or not the different price series are stationary. Augmented Dickey-Fuller (ADF) tests for unit roots have been used and all variables have been found to be integrated of order one, or I(1), with intercept but no trend.1 Though non-stationary, the oil and product price series may form a linear combination which is stationary, or I(0). If this is the case, the relevant price series are said to be cointegrated. The basic model used to test for the presence of cointegration is given by the static regression

ptc = 0 + 1 ptm + 2 pty1 + 3 pty2 + t

(2)

If the residuals t are I(0), then equation (2) provides the long-run or equilibrium relationship between the relevant price series. When two or more variables are

The complete set of results is reported in Tables A1-A3 of the Appendix.

cointegrated, we know from the Engle-Granger representation theorem that they admit an error correction (ECM) formulation of the type:

1 ptc = 0 p ptc p + 1q ptm q + 2 r pty r + 3 s pty2s + t 1 + t

P 1 p =1

Q 1 q=0

R 1

S 1

(3)

r =0

s =0

where
Q 1 = q=0 q

t = ptc 0 + 1 ptm + 2 pty + 3 pty ,


1 2

P 0 = 1 p =1 p ,

(1 (

P p =1

p ,

R P 2 = r =0r 1 p =1 p ,

and

S P 3 = s =0 s 1 p =1 p .

The coefficients i in equation (2) can be interpreted as long-run elasticities of the crude price to the marker price and petroleum products prices. In other terms, each i measures the percentage variation of crude oil price due to a unit percentage variation of each explanatory variable. The choice of explaining oil prices in terms of petroleum product prices relies on the theory of derived demand, which states that the price of an input should be determined by its contribution to the market value of the output reflected in its market price (see Adrangi, Chatrath, Raffiee and Ripple, 2001, for a test of the causal relationship flowing from product prices to crude oil price). Equation (3) incorporates short-run and long-run effects, captured by coefficients

ij and , respectively. In particular, is the so-called long-run adjustment coefficient


which measures how fast ptc converges towards the long-run equilibrium represented by equation (2).

4. Empirical results

For each of the eight selected crudes we should estimate, at least in principle, as many specifications for equation (3) as the number of combinations of products (i.e. six models for MED and NWE, three models for LA and NA). Given the large number of resulting models, we use a simple criterion to select the best specification for each crude. Following Stock and Watson (1993), we estimate an augmented version of equation (2), formed by adding one lead and one lag to all the independent variables (DOLS estimation). In this way we obtain corrected t-statistics for each estimated coefficient, which allow us to select the specifications of the long-run equation with the largest number of statistically significant parameters. If two or more long-run specifications have the same number of significant coefficients, we select the one whose associated ECM yields the largest number of statistically significant parameters. The final product selection for each crude is reported in the third column of Table 5. As it is shown in Table 5, the sum of the estimated coefficients in equation (2) (ignoring the intercept term) is approximately equal to one. Moreover, the null hypothesis that this sum is equal to one is not rejected by the data in 5 cases out of 8.2 These coefficients can be interpreted as the contribution (weight) given by each independent variable to the determination of crude oil price. The price of the marker dominates relation (2), while product prices play a sort of compensation role, in order to preserve the one-to-one relation between the crude and the marker. If we exclude Maya

A corrected Wald test, based on the DOLS coefficient estimates, rejects the null hypothesis at 1%

significance level for Kern River and Thums, and at 5% for Iranian.

in the LA area, the coefficients of the corresponding selected pair of product prices have opposite signs. The contribution of each product to the market value of a particular crude oil is such that a constant balance between price of the crude and price of the marker is maintained in the long-run.

Specifically, 1 is always larger than one, and its magnitude increases as heavier
crudes are considered. These features show that when the price of the marker increases the demand of heavy crude oils increases, which, in turn, forces their price to rise more than proportionally. Furthermore, when the MED and NWE areas are considered, the long-run

coefficients 2 and 3 have positive and negative signs, respectively. The converse is
true when we concentrate on NA. A possible interpretation of this empirical evidence is that, while Europe is characterized by two highly demanded light products (i.e. Gasoline and Gasoil), only Gasoline has a primary role in North America. As a consequence, an increase in the demand for Gasoline in Europe is met using very light crudes in the production process of Gasoline, while medium-quality crudes are employed to produce Gasoil. On the contrary, the North American refinery system is mainly oriented towards the production of Gasoline, which explains the positive long-run correlation between crude and Gasoline prices. In all areas each crude price is cointegrated with the price of the marker and the prices of the selected pair of products, according to the ADF tests on the residuals of the long-run equation (2) reported in Table 6. The best ECM specification is attained with the product pair LSFO-Gasoline for seven crudes out of eight (the only exception is HSFO-Gasoline for Urals NWE). The short-run coefficient of Gasoline in the ECM equation (3) is significant, in all markets

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and for all crudes, with the exception of Forcados. The more volatile product in the short-run (Gasoline) is responsible of the short-run dynamics of the crude oil price. It is well known that the refined barrel can be ideally divided in two classes of products: high-quality (light) and low-quality (heavy) products. Hence, the best explanation of both short-run and long-run behaviour of a crude oil price is obtained when we include in the ECM specification the pair formed by the most representative products in each class, that is LSFO-Gasoline (Table 7). If we combine the information included in Table 1 with Table 7, it is easy to see that the magnitude of the estimated long-run adjustment coefficients is sensitive to the gravity of the specific crude, that is, with the exception of Forcados, a sort of monotonic relation between speed of adjustment and API emerges. Prices of crude oils whose physical characteristics are more similar to the marker are likely to converge more rapidly to the long-run equilibrium. Furthermore, the price of the marker is the driving variable of the crude price also in the short-run, irrespective of the specific geographical area and the quality of the crude under analysis (see Table 5)3.

5. Forecasting crude oil prices


We assess the ability of the ECM specification to predict crude oil prices over the horizon January 2002-June 2002 by computing three different sets of forecasts: static, dynamic and simulated. With the exception of LA area, where only monthly data are available, we split the forecasting horizon (24 weeks) into six windows of four weeks, with the purpose of partially neutralizing potential contingent factors that could affect

The estimated short-run coefficients of the ECM are reported in Table A4 of the Appendix.

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the forecasting evaluation (e.g. changes in OPEC policy). Moreover, in order to make the calculated forecasts comparable, instead of estimating the ECM just once and using the same estimated parameters to calculate forecast values of the dependent variable for each of the six windows, we re-estimate the ECM six times with a rolling-sample technique: in this way, the forecast values in each window depend on updated coefficients estimates from samples of the same size. While static and dynamic forecasts are self-explanatory, the procedure we use to generate the simulated forecasts needs some explanation. The aim of this exercise is to produce true out-of-sample, multistep-ahead forecasts for the crude oil price, given the presence of marker and product prices as exogenous variables in model (3). Lets indicate with T the last in-sample observation for each window. Then:

i) For each variable ptm , pty1 , pty2 and t , we estimated an ARMA(1,1) model of the

type xt = 1 xt 1 + ut + 1ut 1 , t=2,..,T. Since all estimated ARMA(1,1) models are found to be statistically adequate to capture the behaviour of these series, for each model we calculated the residuals ut .

ii) Each ARMA residual vector ut , t=2,..,T, is bootstrapped R=1000 times, to obtain b r bootstrapped residuals ut ( ) , where r=1,..,R=1000 indicates the r-th replication and superscript b denotes a bootstrapped series.

iii)

Each

series ptm , pty1 , pty2 and t

is

simulated

times

out-of-sample

(t=T+1,,T+h) using the estimated ARMA models of stage (i) and the bootstrapped

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( r b r b r r residuals of stage (2). That is: xt ( ) = 1 xt 1 ) + ut ( ) + 1u t (1 ) , t=T+1,..,T+h, where the

superscript

denotes a simulated series, and h=4 (h=6 for the crudes of the LA area,

since only monthly data are available).

iv) for each series ptm , pty1 , pty2 and t , we select, among the R simulated series, that

series whose standard deviation is closest to the standard deviation of the actual series (this last calculated using in-sample observations).
r Formally: xt = min Std .Dev. xt ( ) Std .Dev. ( xt ) , where xt denotes the selected
r

( )

simulated series.

v) we re-estimate the ECM specification (3) over the sample t=k,..,T, where
k = max ( P, Q, R, S ) , and we calculate the residuals t .

vi) Residuals t are bootstrapped R times, thus obtaining t ( ) .


b r

vii) The dependent variable ptc is simulated R times, using the bootstrapped residuals of the ECM model (stage vi) and the simulated exogenous series (stage iv):

(r ) c r c r pt ( ) = pt 1( ) + 0 p ptc p + 1q ptm q + 2 r pty1r + 3 s pty2s + t 1 + ib,t + j

P 1 p =1

Q 1 q=0

R 1

S 1

r =0

s =0

t=T+1,..,T+h. For crudes belonging to the MED, NWE and NA markets, we repeat this procedure for all the 6 windows using the rolling-sample technique illustrated above.

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After completion of the three forecasting exercises, we obtain, for the MED, NWE, and NA areas, 24 one-step-ahead (static) forecasts, 24 (dynamic) h-steps-ahead forecasts (h=1,..,4) and 24 (simulated) forecast distributions, each formed by R=1000 simulated forecasts. All forecasts are collected in six windows of size 4. For the LA area we produce 6 (static) one-step-ahead forecasts, 6 (dynamic) h-steps-ahead forecasts (h=1,..,4) and 6 (simulated) forecast distributions. In order to evaluate the predictive ability of each ECM specifications, we calculate the mean absolute percentage error (MAPE), the Theils inequality coefficient (decomposed in bias, variance and covariance proportions) and the SR (success ratio), which indicates the percentage number of times the forecasted series has the same sign of the corresponding actual series. Moreover, for the simulated forecasts only, we calculate a range of dispersion measures associated to each forecast distribution, as follows. First, we compute the standard deviations of the distribution of forecasts in each window and in each forecasting period (24 standard deviations). Second, we calculate the mean of the 24 standard deviations. Third, for each window, we calculate the mean of the standard deviations relative to the h-th forecasting point, h=1,,4 (mean of 6 standard deviations). Results from static and dynamic forecast are reported in Table 9. The following comments apply. First, due to the different data frequencies, a direct comparison between the LA market and the remaining areas is not possible, although comments that hold for the weekly series can be directly extended to the monthly data.

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Second, if we rank the different crudes according to the forecasting performance of the corresponding ECM specifications using the MAPE, the same ranking holds irrespective of whether the forecasts are static or dynamic. The only exception is Iranian heavy, whose dynamic forecasts seem to be relatively better than the static predictions. Third, there is an almost monotonic relation between MAPE values and crude quality, measured by API gravity and sulphur concentration. Actually, among the crudes with similar gravity, crudes with less sulphur are characterized by lower MAPE. This evidence can be motivated by considering the presence of the marker as an explanatory variable: the closer the crude to the marker, the higher the contribution of the latter in explaining and predicting the former. Fourth, from inspection of the Theils statistic, we experience an increase of the bias proportion and a correspondent reduction of variance and covariance proportions when moving from static to dynamic forecasts. Nonetheless, the values of the Theils coefficient are generally quite small, indicating a good predictive fit. Fifth, the low value of the variance proportion in the dynamic forecasts is perfectly consistent with the values of SR.

Results from the simulated forecasts are reported in Table 10. MAPE, Theils coefficient and SR are calculated on the mean of each forecasted distribution. As expected, the forecasting performance for each model is slightly worse than in the static and dynamic cases. Nevertheless, taking into account the crudes from the LA area, we find that this kind of forecasts performs relatively better for heavier crudes. Actually, MAPE values are almost five times larger than those obtained from the dynamic forecasts in NWE, and almost twice than in NA. Conversely, the heaviest crude in LA

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(i.e. Boscan) has MAPE values which are less than twice those of the dynamic forecast, while Maya, the lightest crude in that area, has a MAPE value which is four times larger. The SR, though lower than in both static and dynamic cases, has values which are higher than 0.50, meaning that the simulated series produce reasonable predictions of the turning points of crude prices. The second section of Table 10 reports several dispersion measures of the forecasted distributions. The mean of all the standard deviations (SD) indicates that lower predicting variability is associated with higher quality crudes. The overall coherence of the simulation exercise is guaranteed by the values of each standard deviation, which increase as the forecasting horizon increases.

6. Conclusions

This paper presents two different exercises that need to be commented in a separate way even if there are some common interesting features. The first conclusion is related to the different relation between a given crude, its area-specific market and the related petroleum products. In this paper we investigate crude oil and products price dynamics using cointegration and ECM. Empirical evidence shows that product price are statistically relevant in explaining short- and long-run adjustment in petroleum markets. The relevant product mix also depend on the specific market area and on the characteristics of the selected crude. It is also worth to underline that the long-run adjustment coefficients are sensitive to the gravity of the specific crude. Prices of crude oils whose physical characteristics are more similar to

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the marker are likely to converge more rapidly to the long-run equilibrium. Furthermore, the price of the marker is the driving variable of the crude price also in the short-run, irrespective of the specific geographical area and the quality of the crude under analysis. The second conclusion is related to the part of the paper aimed at assessing the ability of the ECM specification to predict crude oil prices over the horizon January 2002-June 2002. We computed three different sets of forecasts, namely static, dynamic and simulated, and in general the lower predicting variability is associated with higher quality crudes. Also in this case there is almost monotonic relation between MAPE values and crude quality, measured by API gravity and sulphur concentration. Actually, among the crudes with similar gravity, crudes with less sulphur are characterized by lower MAPE. This evidence can be motivated by considering the presence of the marker as an explanatory variable: the closer the crude to the marker, the higher the contribution of the latter in explaining and predicting the former.

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References
Adrangi, B., A. Chatrath, K. Raffiee and R.D.Ripple (2001), Alaska North Slope crude oil price and the behaviour of diesel prices in California, Energy Economics, 23, 29-42. Asche, F., O. Gjolberg and T. Vlker (2003), Price relationships in the petroleum market. An analysis of crude oil and refined product prices, Energy Economics, 25, 289-301. Engle, R.F., and C.W.J. Granger (1987), Co-integration and error correction: representation, estimation and testing, Econometrica, 55, 251-276. Gjolberg, O., and T. Johnsen (1999), Risk management in the oil industry: can information on long-run equilibrium prices be utilized?, Energy Economics, 21 517-527. The International Crude Oil Market Handbook (2001), Energy Intelligence Group, Fourth Edition. MacKinnon, J.G. (1991), Critical values for co-integration tests, in R.F. Engle and C.W.J. Granger (eds.), Long-run Economic Relationships, Oxford, Oxford University Press. Stock, J. and M. Watson (1993), A simple estimator of cointegrating vectors in higher order integreted systems, Econometrica, 61, 783-820.

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Table 1. Dataset

Mediterranean (MED) Marker: Brent (38.3, 0.37%) - Urals MED (32, 1.3% ) Crudes: - Iranian heavy (30.2, 1.77%) - Premium Gasoline - Gasoil - Low Sulphur Fuel Oil Products: (LSFO) - High Sulphur Fuel Oil (HSFO) Sample: 10/7/1994-06/28/2002 Frequency: weekly Area:
LA and NA.

North Western Europe (NWE) Brent - Urals NWE (32, 1.3%) - Foracdos (31, 0.19%) - Premium Gasoline - Gasoil - Low Sulphur Fuel Oil (LSFO) - High Sulphur Fuel Oil (HSFO) 10/7/1994-06/28/2002 weekly

Latin America North America (LA) (NA) WTI (39.6, 0.24%) WTI - Maya (21.8, 3.33%) - Kern River (13.4, 1.1%) - Boscan (10.1, 5.4%) - Thums (17, 1.50%) - Super Unleaded - Gasoil N2 - Low Sulphur Fuel Oil (LSFO) 01/1994-06/2002 monthly - Super Unleaded - Gasoil N2 - Low Sulphur Fuel Oil (LSFO) 10/7/1994-06/28/2002 weekly

Note to Table 1. Sources Platts and Petroleum Intelligence Weekly (2000); API gravity and sulphur content (%) are reported in parentheses; HSFO is not traded in

Table 2. Descriptive statistics: crude oil prices

Brent Urals MED MED Iranian Urals NWE NWE Forcados WTI Maya LA Boscan Kern River NA Thums

Coefficient of variation (CV) Percent price level 9.40 9.62 10.47 9.52 9.42 8.40 11.49 12.67 12.96 11.76

Annualized standard deviation (ASD) Percent price variation 33.53 37.37 39.23 36.50 34.70 26.82 38.28 35.48 35.67 31.87
T

Note to Table 2. All prices are expressed in logs.

2 p = t =1 ( pt p )
T

CV = 100 ( p p ) where p = t =1 pt T and

(T 1) and
2

ASD = 100

per year, p
2

= t =1 ( pt p )
T

n p , where n is the number of observations


T

(T 1) and p = t =1 pt

T.

Table 3. Descriptive statistics: prices of products

Coefficient of variation (CV) MED NWE LA NA Gasoline Gasoil LSFO HSFO 5.08 5.58 5.46 6.07 4.99 5.14 5.05 5.66 4.48 4.86 5.80 4.56 4.90 5.85 -

Annualized standard deviation (ASD) MED NWE LA NA 30.24 30.64 29.38 32.41 31.18 26.53 25.33 33.74 36.56 25.10 33.01 35.77 29.38 31.12 -

Notes to Table 3. See Table 2

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Table 4. Price change correlations

Brent Brent Urals MED Iranian Urals NWE Forcados WTI Maya Boscan Kern River Thums Gasoline Gasoil LSFO HSFO 1.00 0.96 0.96 0.98 0.99

Urals MED 1.00 0.99 -

Iranian

Urals NWE

Forcad. WTI

Maya

Boscan

Kern River

Thums

1.00 -

1.00 0.97

1.00 1.00 0.91 0.76 0.68 0.70 0.74m 0.57w 0.83m 0.65w 0.71m 0.43w 1.00 0.84 0.70 0.78 0.81 1.00 0.53 0.64 0.67 -

1.00 0.96 0.44 0.48 0.44 -

1.00 0.45 0.49 0.48 -

0.63 0.66 0.45 0.37

0.59 0.63 0.41 0.33

0.59 0.63 0.42 0.33

0.62 0.66 0.40 0.49

0.62 0.66 0.44 0.52

Notes to Table 4. m= monthly; w= weekly.

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Table 5. Estimation of the long-run relationship

Crudes

Urals MED MED Iranian Urals NWE NWE Forcados Maya LA Boscan Kern River NA Thums

Products (y1, y2) LSFO, Gasoline LSFO, Gasoline HSFO, Gasoline LSFO, Gasoline LSFO, Gasoline LSFO, Gasoline LSFO, Gasoline LSFO, Gasoline

R2

3 -0.16** (-2.58) -0.24*** (-3.34) -0.13** (-2.14) -0.08 (-1.51) -0.20 (-0.58) 0.03 (0.06) 0.04 (0.13) 0.03 (0.11)

0.99 0.99 0.99 0.99 0.95 0.91 0.94 0.95

1.04*** (11.69) 1.13*** (11.00) 1.01*** (11.54) 1.06*** (16.23) 1.85*** (4.69) 2.04*** (3.53) 1.35*** (3.77) 1.32*** (4.70)

0.12* (1.72) 0.18** (2.34) 0.11* (1.83) 0.01 (0.43) -0.52* (-1.63) -0.87* (-1.85) -0.07 (-0.24) -0.10 (-0.42)

Notes to Table 5. i i=1,..,3, are the DOLS estimates of the augmented dynamic regression
(see Stock and Watson, 1993), in parentheses the rescaled t-statistics; * (**)[***] indicates significance at 10% (5%) [1%]
r r r ptc = 0 + 1 ptm + 2 pty1 + 3 pty2 + i = r i ptm i + i = r i pty1i + i = r i pty2i + t , with r=1

23

Table 6. Cointegration tests

Products (y1, y2) MED Urals MED LSFO, Gasoline Iranian LSFO, Gasoline NWE Urals NWE HSFO, Gasoline Forcados LSFO, Gasoline LA Maya LSFO, Gasoline Boscan LSFO, Gasoline NA Kern River LSFO, Gasoline Thums LSFO, Gasoline

Crudes

ADF -5.98*** -5.98*** -5.33*** -4.88*** -3.82 (57.96***) -3.79 (53.72***) -5.09*** -5.55***

no no no no no no no no

no no no no no no no no

2 2 2 1 0 0 2 0

Notes to Table 6. ADF is the calculated t test for the null hypothesis of no cointegration (i.e. =0) in the Augmented Dickey-Fuller regression on ^t: the estimated residuals of the DOLS regression; p is the order of the augmentation needed to eliminate any autocorrelation in the residuals of the ADF regression; * (**)[***] indicates significance at 10% (5%) [1%] on the basis of the critical values by MacKinnon, (1991); for crudes in the LA area the Johansens (1991) trace test is reported in parentheses.

t = a + bt + t 1 + i =1 i t i + vt , where ^t are
p

24

Table 7. Selected products and long-run adjustment coefficients

MED Selected products Long-run products Short-run products Long-run adjustment coefficients ( ) LSFO-Gasoline (Urals, Iranian) LSFO-Gasoline (Urals, Iranian) Gasoline (Urals, Iranian)

NWE HSFO-Gasoline (Urals) LSFO-Gasoline (Forcados) HSFO-Gasoline (Urals) (Forcados) Gasoline (Forcados) -0.11 (Urals) -0.06 (Forcados)

LA LSFO-Gasoline (Maya, Boscan) LSFO (Maya, Boscan) LSFO-Gasoline (Maya, Boscan) -0.15 (Maya) -0.09 (Boscan)

NA LSFO-Gasoline (Kern River, Thums)

LSFO-Gasoline (Kern River, Thums)

-0.12 (Urals, Iranian)

-0.07 (Kern River, Thums)

Notes to Table 7. Selected products = pair of products corresponding to the best model specifications (1) and (2); long-run products = products whose coefficients are statistically significant in the long-run relation (1); short-run products = products whose short-run coefficients are statistically significant in model (2); crudes associated with selected products, long-run products, short-run products and long-run adjustment coefficients (see equation (2)) are reported in parentheses.

25

Table 8. Static and dynamic forecast evaluation of selected ECM models

MED Urals med MAPE 0.26 Theil 0.002 BP 0.29 VP 0.29 CP 0.42 MAPE 0.55 Theil 0.003 BP 0.62 VP 0.14 CP 0.25 SR 0.875 Iranian 0.37 0.002 0.06 0.35 0.59 0.52 0.003 0.63 0.18 0.19 0.958 Urals NWE 0.24 0.002 0.31 0.29 0.41 0.52 0.003 0.71 0.21 0.08 1.00

NWE Forcad. 0.08 0.001 0.54 0.14 0.32 0.19 0.001 0.74 0.11 0.15 0.958 Maya 0.96 0.01 0.29 0.003 0.71 2.08 0.01 0.82 0.07 0.11 1.00

LA Boscan 1.95 0.01 0.49 0.03 0.49 5.32 0.03 0.68 0.27 0.05 1.00 Kern River 0.74 0.004 0.26 0.44 0.30 1.48 0.01 0.79 0.17 0.04 0.958

NA Thums 0.86 0.005 0.28 0.35 0.37 1.39 0.01 0.65 0.29 0.06 0.958

Dynamic Forecasts

Static Forecasts

Notes to Table 8. Static forecasts indicate one-step-ahead forecasts, dynamic forecasts indicate 4-stepahead forecasts (6 steps for LA area); MAPE is the mean absolute percentage error, Theil is the Theils Inequality Coefficient and BP, VP, CP are the bias, variance, and covariance proportions. SR is the mean of the success ratio calculated as the percentage number of times the sign of the forecasted series is the same as the sign of the actual series. All the reported values, with the exception of those referring to LA, are mean values calculated over the 6 forecast windows.

26

Table 9. Simulated forecast evaluation of selected ECM models

MED Urals med MAPE 2.42 Theil 0.01 BP 0.69 VP 0.29 CP 0.02 SR 0.58 SD 0.50 SD1 0.25 SD2 0.45 SD3 0.58 SD4 0.70 Iranian 2.26 0.01 0.51 0.45 0.04 0.5 0.53 0.27 0.48 0.62 0.73 Urals NWE 2.40 0.01 0.61 0.37 0.02 0.71 0.38 0.19 0.35 0.45 0.51

NEW Forcad. 2.09 0.01 0.67 0.30 0.03 0.54 0.16 0.09 0.15 0.19 0.22 Maya 9.83 0.06 0.75 0.25 0.004 0.67 0.86 -

LA Boscan 9.56 0.06 0.67 0.33 0.005 0.66 1.44 Kern River 3.54 0.02 0.66 0.19 0.16 0.625 0.91 0.55 0.80 1.03 1.26

NA Thums 3.22 0.02 0.59 0.26 0.14 0.54 0.68 0.47 0.62 0.73 0.88

Dispersion

Mean

Notes to Table 9. Simulated forecast stands for true out of sample 4 (6) step-ahead forecast. In order to calculate the reported measures of dispersion we proceeded as follows: i) we calculated the standard deviations of the distribution of forecasts in each window and in each forecasting period (24 standard deviations); ii) in order to obtain SD we calculated the mean of all the standard deviations of point i. (mean of 24 standard deviations); iii) in order to obtain SDk k=1,..,4 we calculated the mean by window of the standard deviations referring to k-th forecasting point (mean of 6 standard deviations).

27

Appendix

Table A1.Unit root tests: Crudes

a Brent yes no Brent Urals med yes no Urals med Iranian yes no Iranian Urals NWE yes Urals NWE no Forcados yes no Forcados WTI yes no WTI Maya yes no Maya Boscan yes no Boscan Kern River yes Kern River no Thums yes no Thums

b no no no no no no no no no no no no no no no no no no no no

P 1 0 1 0 1 0 1 0 1 0 0 0 0 0 1 0 1 0 1 0

ADF -2.06 -15.94** -2.31 -15.81** -2.24 -15.90** -2.24 -16.07** -2.18 -15.60** -1.69 -8.70** -1.82 -8.33** -2.24 -6.95** -2.26 -15.52** -2.11 -16.00**
p

Notes to Table A1. ADF is the calculated t test for the null hypothesis of a unit root (i.e. =0) in the series xt from the Augmented Dickey-Fuller regression: order of the augmentation needed to eliminate any autocorrelation in the residuals of the ADF regression; * (**)[***] indicates significance at 10% (5%) [1%] on the basis of the critical values by MacKinnon, J.G. (1991) Critical Values for Co-Integration Tests, in R.F. Engle and C.W.J. Granger (eds.), Long-run Economic Relationships, Oxford, Oxford University Press..

xt = a + bt + xt 1 + i =1 i xt 1 + t ; p is the

28

Table A2. Unit root tests: Products, Europe

MED a b p Gasoline yes no 1 no 0 Gasoline no Gasoil yes no 1 no no 0 Gasoil LSFO yes no 1 no no 0 LSFO HSFO yes no 2 no no 1 HSFO Notes to Table A2. see Table A1

ADF -2.18 -14.17** -2.03 -14.63** -2.50 -12.51** -2.44 -11.26**

NWE a yes no yes no yes no yes no

b no no no no no no no no

p 1 0 1 0 1 0 1 0

ADF -2.15 -15.02** -1.84 -15.12** -2.16 -13.45** -2.19 -15.59**

29

Table A3. Unit root tests: Products, America

LA a b p Gasoline yes no 0 no 0 Gasoline no Gasoil yes no 1 no no 0 Gasoil LSFO yes no 0 no no 0 LSFO Notes to Table A3. see Table A1

ADF -2.27 -9.51** -1.88 -7.68** -1.73 -8.92**

NA a yes no No no yes no

b no no no no no no

p 1 0 1 0 1 0

ADF -2.73 -16.34** -1.73 -19.25** -2.37 -14.54**

30

Table A4. ECM model estimates

Products (y1, y2)


01

02 03 10 11 12 13 20 21 22 23 30 31 32 33
BG-stat R2

Urals MED LSFO, Gasoline 0.51*** (11.15) -0.22*** (-4.46)

Iranian LSFO, Gasoline 0.42*** (8.89) -0.15*** (-2.95)

Urals NWE HSFO, Gasoline 0.48*** (10.56) -0.28*** (-5.88)

Forcados LSFO, Gasoline 0.30*** (6.04) -0.001 (-0.03)

Maya LSFO, Gasoline

Boscan LSFO, Gasoline

1.11*** (13.39) 0.34 (6.19) -0.08 (-1.47) ***

0.98*** (6.74) 0.27*** (2.70) -0.17* (-1.83) -

1.11*** (64.9) -0.57*** (-10.8) 0.23*** (4.27) -0.02 (-0.98) -0.01 (-0.29) 0.01 (0.79) -0.04** (-2.01) 0.07*** (3.26) -0.04** (-2.04) -0.12*** (-5.56) 0.01 0.95
P 1

1.15*** (59.53) -0.49*** (-8.49) 0.16*** (2.77) 0.003 (0.17) -0.02 (-0.87) 0.02 (0.82) -0.04* (-1.84) 0.04* (1.81) -0.02 (-0.75) -

1.09*** (74.96) -0.52*** (-10.2) 0.30*** (5.65) -0.02 (-1.44) 0.01 (0.96) -0.01 (-0.36) 0.01 (0.29) 0.001 (0.05) -0.02 (-1.45) -

1.04*** (167.06) -0.29*** (-5.58) -0.01 (-0.15) -0.01 (-1.19) -0.01 (-0.77) 0.01 (1.24) -0.02** (-2.51) 0.01 (1.54) 0.01** (2.08) -

-0.12*** (-5.55) 0.63 0.94

-0.11*** (-5.45) 0.71 0.97


Q 1

-0.06*** (-4.32) 2.07 0.99


R 1

-0.15*** (-3.75) 0.61 0.90


S 1

-0.10** (-1.96) 6.21* 0.64

Kern River LSFO, Gasoline 0.02 (0.37) 0.03 (0.57) 0.13 (3.19***) 0.73*** (16.51) 0.33*** (5.84) 0.10* (1.76) -0.02 (-0.29) 0.07* (1.70) -0.10** (-2.26) 0.02 (0.36) 0.01 (0.18) -0.01 (-0.38) 0.09** (2.29) 0.01 (0.22) -0.05 (-1.37) -0.07** (-4.18) 0.36 0.64

Thums LSFO, Gasoline -0.05 (-1.13) -0.02 (-0.54) 0.15 (3.53***) 0.66*** (17.67) 0.34*** (6.91) 0.12** (2.30) 0.002 (0.05) 0.11*** (2.96) -0.08** (-2.03) 0.03 (0.70) 0.02 (-0.91) -0.03 (-0.91) 0.05* (1.64) 0.03 (0.77) -0.04 (-1.31) -0.07*** (-3.71) 0.94 0.67

Notes to Table A4. The ECM specification is

ptc = p =1 0 p ptc p + q =0 1q ptm q + r = 0 2 r pty1r + s =0 3 s pty2s + t 1 + t , where


P=Q=R=S; BG- stat is the LM version of the Breusch-Godfrey test for absence of first order residual autocorrelation in the regression; * (**)[***] indicates significance at 10% (5%) [1%]

31

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PRIV PRIV PRIV PRIV PRIV PRIV PRIV PRIV CLIM KNOW ETA SIEV NRM CLIM KNOW CLIM KNOW KNOW KNOW KNOW KNOW KNOW KNOW Coalition Theory Network PRIV PRIV PRIV PRIV PRIV PRIV PRIV PRIV PRIV PRIV PRIV ETA KNOW PRIV KNOW ETA

112.2002 113.2002 114.2002 115.2002 116.2002 1.2003 2.2003 3.2003 4.2003 5.2003 6.2003 7.2003 8.2003 9.2003 10.2003 11.2003 12.2003 13.2003 14.2003 15.2003 16.2003 17.2003 18.2003 19.2003 20.2003 21.2003 22.2003 23.2003 24.2003 25.2003 26.2003 27.2003 28.2003 29.2003 30.2003 31.2003 32.2003 33.2003 34.2003 35.2003

Isaac OTCHERE: Intra-Industry Effects of Privatization Announcements: Evidence from Developed and Developing Countries Yannis KATSOULAKOS and Elissavet LIKOYANNI: Fiscal and Other Macroeconomic Effects of Privatization Guillaume GIRMENS: Privatization, International Asset Trade and Financial Markets D. Teja FLOTHO: A Note on Consumption Correlations and European Financial Integration Ibolya SCHINDELE and Enrico C. PEROTTI: Pricing Initial Public Offerings in Premature Capital Markets: The Case of Hungary Gabriella CHIESA and Giovanna NICODANO: Privatization and Financial Market Development: Theoretical Issues Ibolya SCHINDELE: Theory of Privatization in Eastern Europe: Literature Review Wietze LISE, Claudia KEMFERT and Richard S.J. TOL: Strategic Action in the Liberalised German Electricity Market Laura MARSILIANI and Thomas I. RENSTRM: Environmental Policy and Capital Movements: The Role of Government Commitment Reyer GERLAGH: Induced Technological Change under Technological Competition Efrem CASTELNUOVO: Squeezing the Interest Rate Smoothing Weight with a Hybrid Expectations Model Anna ALBERINI, Alberto LONGO, Stefania TONIN, Francesco TROMBETTA and Margherita TURVANI: The Role of Liability, Regulation and Economic Incentives in Brownfield Remediation and Redevelopment: Evidence from Surveys of Developers Elissaios PAPYRAKIS and Reyer GERLAGH: Natural Resources: A Blessing or a Curse? A. CAPARRS, J.-C. PEREAU and T. TAZDAT: North-South Climate Change Negotiations: a Sequential Game with Asymmetric Information Giorgio BRUNELLO and Daniele CHECCHI: School Quality and Family Background in Italy Efrem CASTELNUOVO and Marzio GALEOTTI: Learning By Doing vs Learning By Researching in a Model of Climate Change Policy Analysis Carole MAIGNAN, Gianmarco OTTAVIANO and Dino PINELLI (eds.): Economic Growth, Innovation, Cultural Diversity: What are we all talking about? A critical survey of the state-of-the-art Carole MAIGNAN, Gianmarco OTTAVIANO, Dino PINELLI and Francesco RULLANI (lix): Bio-Ecological Diversity vs. Socio-Economic Diversity. A Comparison of Existing Measures Maddy JANSSENS and Chris STEYAERT (lix): Theories of Diversity within Organisation Studies: Debates and Future Trajectories Tuzin BAYCAN LEVENT, Enno MASUREL and Peter NIJKAMP (lix): Diversity in Entrepreneurship: Ethnic and Female Roles in Urban Economic Life Alexandra BITUSIKOVA (lix): Post-Communist City on its Way from Grey to Colourful: The Case Study from Slovakia Billy E. VAUGHN and Katarina MLEKOV (lix): A Stage Model of Developing an Inclusive Community Selma van LONDEN and Arie de RUIJTER (lix): Managing Diversity in a Glocalizing World Sergio CURRARINI: On the Stability of Hierarchies in Games with Externalities Giacomo CALZOLARI and Alessandro PAVAN (lx): Monopoly with Resale Claudio MEZZETTI (lx): Auction Design with Interdependent Valuations: The Generalized Revelation Principle, Efficiency, Full Surplus Extraction and Information Acquisition Marco LiCalzi and Alessandro PAVAN (lx): Tilting the Supply Schedule to Enhance Competition in UniformPrice Auctions David ETTINGER (lx): Bidding among Friends and Enemies Hannu VARTIAINEN (lx): Auction Design without Commitment Matti KELOHARJU, Kjell G. NYBORG and Kristian RYDQVIST (lx): Strategic Behavior and Underpricing in Uniform Price Auctions: Evidence from Finnish Treasury Auctions Christine A. PARLOUR and Uday RAJAN (lx): Rationing in IPOs Kjell G. NYBORG and Ilya A. STREBULAEV (lx): Multiple Unit Auctions and Short Squeezes Anders LUNANDER and Jan-Eric NILSSON (lx): Taking the Lab to the Field: Experimental Tests of Alternative Mechanisms to Procure Multiple Contracts TangaMcDANIEL and Karsten NEUHOFF (lx): Use of Long-term Auctions for Network Investment Emiel MAASLAND and Sander ONDERSTAL (lx): Auctions with Financial Externalities Michael FINUS and Bianca RUNDSHAGEN: A Non-cooperative Foundation of Core-Stability in Positive Externality NTU-Coalition Games Michele MORETTO: Competition and Irreversible Investments under Uncertainty_ Philippe QUIRION: Relative Quotas: Correct Answer to Uncertainty or Case of Regulatory Capture? Giuseppe MEDA, Claudio PIGA and Donald SIEGEL: On the Relationship between R&D and Productivity: A Treatment Effect Analysis Alessandra DEL BOCA, Marzio GALEOTTI and Paola ROTA: Non-convexities in the Adjustment of Different Capital Inputs: A Firm-level Investigation

GG PRIV CLIM KNOW CTN KNOW KNOW ETA CLIM PRIV SIEV ETA CLIM CLIM CTN CTN CTN CTN CTN CTN CTN CTN KNOW KNOW ETA CLIM GG SIEV CLIM SIEV SIEV SIEV CLIM KNOW KNOW KNOW KNOW KNOW KNOW KNOW KNOW

36.2003 37.2003 38.2003 39.2003 40.2003 41.2003 42.2003 43.2003 44.2003 45.2003 46.2003 47.2003 48.2003 49.2003 50.2003 51.2003 52.2003 53.2003 54.2003 55.2003 56.2003 57.2003 58.2003 59.2003 60.2003 61.2003 62.2003 63.2003 64.2003 65.2003 66.2003 67.2003 68.2003 69.2003 70.2003 71.2003 72.2003 73.2003 74.2003 75.2003 76.2003

Matthieu GLACHANT: Voluntary Agreements under Endogenous Legislative Threats Narjess BOUBAKRI, Jean-Claude COSSET and Omrane GUEDHAMI: Postprivatization Corporate Governance: the Role of Ownership Structure and Investor Protection Rolf GOLOMBEK and Michael HOEL: Climate Policy under Technology Spillovers Slim BEN YOUSSEF: Transboundary Pollution, R&D Spillovers and International Trade Carlo CARRARO and Carmen MARCHIORI: Endogenous Strategic Issue Linkage in International Negotiations Sonia OREFFICE: Abortion and Female Power in the Household: Evidence from Labor Supply Timo GOESCHL and Timothy SWANSON: On Biology and Technology: The Economics of Managing Biotechnologies Giorgio BUSETTI and Matteo MANERA: STAR-GARCH Models for Stock Market Interactions in the Pacific Basin Region, Japan and US Katrin MILLOCK and Cline NAUGES: The French Tax on Air Pollution: Some Preliminary Results on its Effectiveness Bernardo BORTOLOTTI and Paolo PINOTTI: The Political Economy of Privatization Elbert DIJKGRAAF and Herman R.J. VOLLEBERGH: Burn or Bury? A Social Cost Comparison of Final Waste Disposal Methods Jens HORBACH: Employment and Innovations in the Environmental Sector: Determinants and Econometrical Results for Germany Lori SNYDER, Nolan MILLER and Robert STAVINS: The Effects of Environmental Regulation on Technology Diffusion: The Case of Chlorine Manufacturing Lori SNYDER, Robert STAVINS and Alexander F. WAGNER: Private Options to Use Public Goods. Exploiting Revealed Preferences to Estimate Environmental Benefits Lszl . KCZY and Luc LAUWERS (lxi): The Minimal Dominant Set is a Non-Empty Core-Extension Matthew O. JACKSON (lxi):Allocation Rules for Network Games Ana MAULEON and Vincent VANNETELBOSCH (lxi): Farsightedness and Cautiousness in Coalition Formation Fernando VEGA-REDONDO (lxi): Building Up Social Capital in a Changing World: a network approach Matthew HAAG and Roger LAGUNOFF (lxi): On the Size and Structure of Group Cooperation Taiji FURUSAWA and Hideo KONISHI (lxi): Free Trade Networks Halis Murat YILDIZ (lxi): National Versus International Mergers and Trade Liberalization Santiago RUBIO and Alistair ULPH (lxi): An Infinite-Horizon Model of Dynamic Membership of International Environmental Agreements Carole MAIGNAN, Dino PINELLI and Gianmarco I.P. OTTAVIANO: ICT, Clusters and Regional Cohesion: A Summary of Theoretical and Empirical Research Giorgio BELLETTINI and Gianmarco I.P. OTTAVIANO: Special Interests and Technological Change Ronnie SCHB: The Double Dividend Hypothesis of Environmental Taxes: A Survey Michael FINUS, Ekko van IERLAND and Robert DELLINK: Stability of Climate Coalitions in a Cartel Formation Game Michael FINUS and Bianca RUNDSHAGEN: How the Rules of Coalition Formation Affect Stability of International Environmental Agreements Alberto PETRUCCI: Taxing Land Rent in an Open Economy

Joseph E. ALDY, Scott BARRETT and Robert N. STAVINS: Thirteen Plus One: A Comparison of Global Climate Policy Architectures Edi DEFRANCESCO: The Beginning of Organic Fish Farming in Italy Klaus CONRAD: Price Competition and Product Differentiation when Consumers Care for the Environment Paulo A.L.D. NUNES, Luca ROSSETTO, Arianne DE BLAEIJ: Monetary Value Assessment of Clam Fishing Management Practices in the Venice Lagoon: Results from a Stated Choice Exercise ZhongXiang ZHANG: Open Trade with the U.S. Without Compromising Canadas Ability to Comply with its Kyoto Target David FRANTZ (lix): Lorenzo Market between Diversity and Mutation Ercole SORI (lix): Mapping Diversity in Social History Ljiljana DERU SIMIC (lxii): What is Specific about Art/Cultural Projects? Natalya V. TARANOVA (lxii):The Role of the City in Fostering Intergroup Communication in a Multicultural Environment: Saint-Petersburgs Case Kristine CRANE (lxii): The City as an Arena for the Expression of Multiple Identities in the Age of Globalisation and Migration Kazuma MATOBA (lxii): Glocal Dialogue- Transformation through Transcultural Communication Catarina REIS OLIVEIRA (lxii): Immigrants Entrepreneurial Opportunities: The Case of the Chinese in Portugal Sandra WALLMAN (lxii): The Diversity of Diversity - towards a typology of urban systems

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77.2003 78.2003 79.2003 80.2003 81.2003

Richard PEARCE (lxii): A Biologists View of Individual Cultural Identity for the Study of Cities Vincent MERK (lxii): Communication Across Cultures: from Cultural Awareness to Reconciliation of the Dilemmas Giorgio BELLETTINI, Carlotta BERTI CERONI and Gianmarco I.P.OTTAVIANO: Child Labor and Resistance to Change Michele MORETTO, Paolo M. PANTEGHINI and Carlo SCARPA: Investment Size and Firms Value under Profit Sharing Regulation Alessandro LANZA, Matteo MANERA and Massimo GIOVANNINI: Oil and Product Dynamics in International Petroleum Markets

(l) This paper was presented at the Workshop Growth, Environmental Policies and Sustainability organised by the Fondazione Eni Enrico Mattei, Venice, June 1, 2001 (li) This paper was presented at the Fourth Toulouse Conference on Environment and Resource Economics on Property Rights, Institutions and Management of Environmental and Natural Resources, organised by Fondazione Eni Enrico Mattei, IDEI and INRA and sponsored by MATE, Toulouse, May 3-4, 2001 (lii) This paper was presented at the International Conference on Economic Valuation of Environmental Goods, organised by Fondazione Eni Enrico Mattei in cooperation with CORILA, Venice, May 11, 2001 (liii) This paper was circulated at the International Conference on Climate Policy Do We Need a New Approach?, jointly organised by Fondazione Eni Enrico Mattei, Stanford University and Venice International University, Isola di San Servolo, Venice, September 6-8, 2001 (liv) This paper was presented at the Seventh Meeting of the Coalition Theory Network organised by the Fondazione Eni Enrico Mattei and the CORE, Universit Catholique de Louvain, Venice, Italy, January 11-12, 2002 (lv) This paper was presented at the First Workshop of the Concerted Action on Tradable Emission Permits (CATEP) organised by the Fondazione Eni Enrico Mattei, Venice, Italy, December 3-4, 2001 (lvi) This paper was presented at the ESF EURESCO Conference on Environmental Policy in a Global Economy The International Dimension of Environmental Policy, organised with the collaboration of the Fondazione Eni Enrico Mattei , Acquafredda di Maratea, October 6-11, 2001 (lvii) This paper was presented at the First Workshop of CFEWE Carbon Flows between Eastern and Western Europe, organised by the Fondazione Eni Enrico Mattei and Zentrum fur Europaische Integrationsforschung (ZEI), Milan, July 5-6, 2001 (lviii) This paper was presented at the Workshop on Game Practice and the Environment, jointly organised by Universit del Piemonte Orientale and Fondazione Eni Enrico Mattei, Alessandria, April 12-13, 2002 (lix) This paper was presented at the ENGIME Workshop on Mapping Diversity, Leuven, May 1617, 2002 (lx) This paper was presented at the EuroConference on Auctions and Market Design: Theory, Evidence and Applications, organised by the Fondazione Eni Enrico Mattei, Milan, September 2628, 2002 (lxi) This paper was presented at the Eighth Meeting of the Coalition Theory Network organised by the GREQAM, Aix-en-Provence, France, January 24-25, 2003 (lxii) This paper was presented at the ENGIME Workshop on Communication across Cultures in Multicultural Cities, The Hague, November 7-8, 2002

2002 SERIES
CLIM VOL SUST NRM KNOW MGMT PRIV ETA Climate Change Modelling and Policy (Editor: Marzio Galeotti ) Voluntary and International Agreements (Editor: Carlo Carraro) Sustainability Indicators and Environmental Valuation (Editor: Carlo Carraro) Natural Resources Management (Editor: Carlo Giupponi) Knowledge, Technology, Human Capital (Editor: Dino Pinelli) Corporate Sustainable Management (Editor: Andrea Marsanich) Privatisation, Regulation, Antitrust (Editor: Bernardo Bortolotti) Economic Theory and Applications (Editor: Carlo Carraro)

2003 SERIES
CLIM GG SIEV NRM KNOW IEM CSRM PRIV ETA CTN Climate Change Modelling and Policy (Editor: Marzio Galeotti ) Global Governance (Editor: Carlo Carraro) Sustainability Indicators and Environmental Valuation (Editor: Anna Alberini) Natural Resources Management (Editor: Carlo Giupponi) Knowledge, Technology, Human Capital (Editor: Gianmarco Ottaviano) International Energy Markets (Editor: Anil Markandya) Corporate Social Responsibility and Management (Editor: Sabina Ratti) Privatisation, Regulation, Antitrust (Editor: Bernardo Bortolotti) Economic Theory and Applications (Editor: Carlo Carraro) Coalition Theory Network