Table 1 Empirical hypotheses
From: How do supply or demand shocks affect the US oil market?
Hypothesis | Explanation | Causality link |
|---|---|---|
Supply-driven market integration | Supply forces influence the prices of refined products | \(WTI \Rightarrow Deriv\) \(WTI + \Rightarrow Deriv +\) \(WTI - \Rightarrow Deriv -\) |
Rockets and feathers hypothesis | Refined products prices rise more quickly when crude oil prices increase than they plunge when crude oil prices drop | \(WTI + \Rightarrow Deriv +\) \(WTI - \nRightarrow Deriv -\) |
Demand-driven market integration (Verleger hypothesis) | Refined products are the main determinants of crude oil price | \(Deriv \Rightarrow WTI\) \(Deriv + \Rightarrow WTI +\) \(Deriv - \Rightarrow WTI -\) |
Feedback mechanism | Both of demand-driven and supply-driven market integration affect any product | \(WTI \Leftrightarrow Deriv\) \(WTI + \Leftrightarrow Deriv +\) \(WTI - \Leftrightarrow Deriv -\) |