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Do Seasonal Tropical Storm Forecasts Affect Crack Spread Prices?
Author(s) -
Fink Jason,
Fink Kristin
Publication year - 2014
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21607
Subject(s) - tropical cyclone , storm , atlantic hurricane , futures contract , economics , climatology , environmental science , econometrics , meteorology , financial economics , geography , geology
Individual storms in the Gulf of Mexico have been shown to affect crack spread futures prices. As hurricanes strike refiner‐dense areas, prices of refined petroleum products rise. We find that crack spread prices are even affected by seasonal hurricane forecasts. We find this despite the difficulties of long horizon forecasting, and that refiners are only exposed in a small portion of the Atlantic basin. These effects are economically important. For example, a one standard deviation increase in the June forecast of the net tropical cyclone activity in the upcoming season increases 3‐2‐1 crack spread prices by over 9%. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 34:420–433, 2014