Crude oil - end-product linkages in the European petroleum markets

Abstract

Crude oil prices were found to have a significant impact on retail petroleum product prices and were shown to affect inflation and other key economic indicators. This article analyses the former's link in the European Union (EU) within a multi-national and multi-product framework. The results indicate that the old EU countries from North-West Europe are well integrated in the global petroleum markets, while the Mediterranean and Eastern European countries depend on the low-quality Russian oils. Furthermore, while product prices in the North West Europe are driven by the world benchmark crudes, countries with easy access to Russian oil are in the bidirectional relationship with its prices. Copyright 2007 Organization of the Petroleum Exporting Countries.