Gasoline Prices on the Rise

Gasoline Prices on the Rise

The modern day society grows more and more dependent on gas and gas-based products. And despite the evolutions which have marked the research community, fact remains that alternative sources of fuel remain unsustainable at a large scale. The need to assess the price evolution of the gasoline is as such linked to the life quality of individuals across the globe.

At a more specific level, the demand for oil is known as being inelastic. This particularly means that a change in the demand or supply of oil -- be it as small a change as possible -- would generate a tremendous change in the price. For instance, it is possible for an increase in the demand for oil by 5 per cent to generate a 10 per cent -- or even higher -- increase in the price of oil.

The demand for a study focused on the historic evolution of gasoline prices is as such necessary in order to assess its potential impacts on the quality of human life. Additionally, such a study is even more so relevant and intriguing today, when the revolutions and civil wars in Egypt, Libya and other countries in the region impact the international price of oil.

2. Technical approach

The scope of the current study is that of assessing the evolution of gasoline prices. In order to attain this objective, the statistical method would be applied as follows:

Data would be collected from various sources

The information collected would be integrated in excel tables

The information collected would be used to create charts to explain the evolution of gasoline prices

Data from other sources would be collected and used to explain the past evolution of the gasoline prices.

3. Results and conclusion

The Results and conclusion section is constructed onto four specific subsections, each detailing specific issues of the research conducted. These four subsections refer to the following:

The computer output

The charts

The P-value analysis

The study limitations

3.1. The computer output

The computer output is represented by the excel table annexed to the project. It represents information collected on the gasoline prices practiced within the United States starting with the 3rd of January 2011 and ending with the 21st of February 2011. The information is structured on the four categories of gasoline, namely all grades, midgrade, premium and regular. The data is also structured on the vast regions of the North American country. For purposes of computation simplicity, the data to be processed refers to the entire United States, without consideration to region. This compromise does not raise problems since trends and prices are similar across the entire country and no major differences are observable state wide.

In this order of ideas, the second component of the computer output is represented by the charts which are created to reveal the evolution of the gasoline prices across the United States from the 3rd of January 2011 through the 21st of February 2011. These charts are revealed below:

As it can be observed from the charts above, the prices of the gasoline sold across the United States within the first two months of 2011 have generally witnessed increases. These increases are mostly attributed to the conflicts in the Middle East and Africa, more than a domestic increase in demand. Nevertheless, in order to better understand the gasoline prices, more details would be sought.

3.2. The chart

At this level of the research endeavor, emphasis would be placed on the secondary sources of information. These reveal the benefit of presenting the reader and the researcher with vast information on the historic evolution of the gas prices. The most reputable source in this sense is represented by the Energy Information Administration, which has recently issued a report on the energy outlook. According to the researchers and editors at EIA, the five-year evolution of the gasoline prices in the United States is represented as follows:

Massive price increases in 2007 and the first half of 2008

Dramatic price decrease in the second half of 2008

Slow, but steady increase starting with 2009 and continuing through 2012

The growth in prices commenced in 2009 and expected to continue through 2012 would not lead to the same high gasoline prices as registered in the first half of 2008. The chart below reveals this evolution and projection:

3.3. The P-value analysis

At this level of the analysis, the evolution of the gasoline prices would be assessed with the help of the P-value analysis. The P-value analysis is an analysis which evaluates the statistical importance of a phenomenon and the probability for the phenomenon to materialize (University of the West of England).

The hypothesis at this stage is that within the following six months, at least four months would witness an additional increase in prices. In order to test this hypothesis, the p-value is computed as shown in the formula in the capture below:

This low p-value indicates that the hypothesis issued is extremely likely to materialize as the phenomenon on of price increases is statistically relevant. The finding is also supported by the researchers at the Energy Information Administration, who expect the price of the barrel of crude oil to increase with an estimated $14 comparative to 2010. In both 2011 and 2012, the experts expect an increase in the gasoline prices within the United States.

3.4. The study limitations

A first limitation of the current study is that it applies the statistical method only to the four gasoline categories and at the general level of the United States. In other words, it does not consider the state, or region, specific differences in gasoline prices. Nevertheless, this limitation is acceptable and not perceived to impact the overall study findings due to the fact that the gasoline price trends are similar across the country. Also, the application of the statistical model to the individual figures of each category in each U.S. region would exponentially increase the complexity of the study.