Oil price hysteresis and volatility in the Philippines

Abstract

We analyze the monthly time series data from 1999-2009 of oil pump and the Dubai crude prices. The relationship of these prices to the fluctuations of the foreign exchange of the US Dollar and the Philippine Peso was evaluated by calculating the correlation coefficient, mutual information and transfer entropy. Results show that there is a price hysteresis in the prices of Dubai crude and diesel and gasoline. Dubai prices have a greater effect on gasoline prices than on diesel which is probably because diesel is politically controlled commodity. Foreign exchange rates, although not correlated with the oil prices, still has an effect on the price rates as shown by its large transfer entropy.