Crude Oil And Motor Fuel: Fair Price Revisited
AbstractIn April 2009, we introduced a model representing the evolution of motor fuel price (a subcategory of the consumer price index of transportation) relative to the overall CPI as a linear function of time. Under our framework, all price deviations from the linear trend are transient and the price must promptly return to the trend. Specifically, the model predicted that “the price for motor fuel in the US will also grow by 50% by the end of 2009. Oil price is expected to rise by ~50% as well, from its current value of ~$50 per barrel.” The behavior of actual price has shown that this prediction is accurate in both amplitude and trajectory shape. Hence, one can conclude that the concept of price decomposition into a short-term (oscillating) and long-term (linear trend) components is valid. According to the model, the price of motor fuel and crude oil will be falling to the level of $30 per barrel during the next 5 to 8 years.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21869.
Date of creation: 06 Apr 2010
Date of revision:
CPI; PPI; crude oil; motor fuel; price; prediction; USA;
Other versions of this item:
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-ENE-2010-04-17 (Energy Economics)
- NEP-MAC-2010-04-17 (Macroeconomics)
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- Kitov, Ivan, 2009. "Apples and oranges: relative growth rate of consumer price indices," MPRA Paper 13587, University Library of Munich, Germany.
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