Finding the Interdependence among Various Crude Oil Prices: A Grey Relation Network Analysis

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Abstract

Previous research on the interdependence among crude oil prices focused mainly on the long-term equilibrium of the bivariate oil prices, ignoring the time-varying dynamic correlation of the multivariate oil prices. This paper proposes a study framework that combines grey relation analysis (GRA) and complex network theory to reveal the interdependence among oil price fluctuations from the one-to-one to many-to-many perspective. We used 26 groups of weekly oil price time series involving OPEC and non-OPEC oil spot prices and global representative oil future prices as empirical data. We attempted to characterize the oil price fluctuations' spread and interdependence before and after the global financial crisis and analyze possible leading roles. Our main findings focused on the changes before and after the global financial crisis. First, the GRA results showed the interdependence among oil price fluctuations is strengthened, which indicated the globalization characteristic of oil price fluctuations. Second, the general characteristic of oil price fluctuations' interdependent network showed the global oil prices tend to be more obvious regional collectivization, and the average spreading path length of global oil price fluctuations becomes shorter. Third, the nodes' characteristic of network showed the number of the leading and intermediary oil prices are reduced, particularly, the role of the WTI and Brent oil future prices is relatively weakened. Fourth, the division of network community showed the more remarkable double characteristics both of the globalization and regionalization of global oil price fluctuations. These findings provide a novel perspective to understand the oil market before and after the global financial crisis.

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APA

Jia, X., & An, H. (2015). Finding the Interdependence among Various Crude Oil Prices: A Grey Relation Network Analysis. In Energy Procedia (Vol. 75, pp. 2563–2568). Elsevier Ltd. https://doi.org/10.1016/j.egypro.2015.07.296

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