Originally Posted by
SmilingBoy
Good to get into numbers. A few observations:
- No point comparing European jet fuel prices with NYMEX prices - the distance results in imperfect correlation.
Not if you take the regional contracts.
Originally Posted by
SmilingBoy
- Why use spot prices for jet fuel and futures prices for crude? The original suggestion was that jet fuel prices did not come down whereas crude prices did.
See my post ... I realised that, too, and added spot correlations.
Originally Posted by
SmilingBoy
I was surprised at your low correlations so made a little analysis myself. As I don't have access to Platts I used data from
http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_m.htm and correlated the series "Europe Brent Spot Price FOB (Dollars per Barrel)" with the series "Amsterdam-Rotterdam-Antwerp (ARA) Kerosene-Type Jet Fuel Spot Price FOB (Cents per Gallon)". These are monthly spot prices, probably both taken in the ARA region.
The picture that emerges is remarkably different to what you present. Whether you use 2, 3, 4, ..., 21 years of data does not make a difference: the correlation is always above 0.99 and seems to be around 0.996 in the long-run.
We should take this offline. I doubt the mods will tolerate a detailed discussion abt. corr. analysis here. You'll have PM.