Studying Gas Prices in LA
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Nate Bennett says:
The Energy Information Administration, a subsidiary of the Department of Energy, keeps track of the average weekly price for a gallon of gas in many major metropolitan areas in the US, and they also keep track of the average weekly spot price for a barrel of crude oil. The price of gasoline has been used to predict the traffic flows on the major freeways in LA County, thus a model that predicts this price would be of use to economists. Since gas is derived by refining crude oil, it makes to model the trends for both of these jointly since the demand for both gas and oil are highly correlated as seen in the figure below. Also one can use the price of oil to predict the cost of gas. My gas price prediction (95% Interval) for January 11 is $3.05 ($2.95, $3.15), for March 15 is $3.10 ($2.90, $3.30), and for January 3, 2011 is $3.30 ($3.00, $3.60). My oil price prediction (95% Interval) for January 11 is $75 ($70, $80), for March 15 is $78 ($70, $86), and for January 3, 2011 is $86 ($74, $98).
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