Crude oil and motor fuel: Fair price revisited
In 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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- Kitov, Ivan, 2009. "Apples and oranges: relative growth rate of consumer price indices," MPRA Paper 13587, University Library of Munich, Germany.
- Kitov, Ivan, 2009. "Predicting gold ores price," MPRA Paper 15873, University Library of Munich, Germany.
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"Sustainable trends in producer price indices,"
15194, University Library of Munich, Germany.
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"Long-term linear trends in consumer price indices,"
6900, University Library of Munich, Germany.
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