Authors:
Chinwe Roseline Okoye, I. D. Essi

Addresses:
Department of Mathematics, Rivers State University, Port Harcourt, Rivers State, Nigeria.

Abstract:

West Texas Intermediate and Dubai/Oman crude oil price parameters. Brent and Dubai/Oman crude oil prices exhibit significant negative error-correction rates (-0.507 and -0.821), indicating a strong tendency to return to long-term equilibrium after short-term shocks. In contrast, West Texas Intermediate (WTI) shows a positive, though statistically insignificant, coefficient, suggesting divergence and poor integration with global oil prices. The diagnostic tests showed Brent and Dubai/Oman crude oil price inequality and non-normality, justifying the use of the VECH-GARCH model. VECH-GARCH estimates that exogenous shocks influence oil price swings (ARCH effects ranging from 0.026 to 0.105) and show strong stability (GARCH coefficients up to 0.965). Portmanteau and Q-Q diagnostic tests show that the model reflects conditional variance behaviour. Brent and Dubai/Oman adapt better to global market signals than West Texas Intermediate, which is distorted by regional factors. These findings highlight the need to select criteria, integrate volatility modelling into decision-making, and implement region-specific market reforms for market participants, policymakers, and risk managers. Joint modelling of equilibrium correction and volatility transition provides a viable framework for understanding global oil pricing dynamics.

Keywords: West Texas Intermediate; Brent Crude Oil Prices; VECH-GARCH Model; Dynamics and Equilibrium; Error Correction Models; Multivariate GARCH Models; Augmented Dickey-Fuller; Phillip Perron Test.

Received on: 29/01/2025, Revised on: 30/04/2025, Accepted on: 25/07/2025, Published on: 23/11/2025

DOI: 10.69888/FTSTPL.2025.000505

FMDB Transactions on Sustainable Technoprise Letters, 2025 Vol. 3 No. 4, Pages: 200-210

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