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A fair price for motor fuel in the United States

Author

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  • Kitov, Ivan
  • Kitov, Oleg

Abstract

In the United States, there exist robust linear trends in the differences between headline (or core) CPI and price indices for individual subcategories of goods and services such as energy, food, housing, etc. Chiefly these differences can be represented by a piece-wise straight line. The periods of the transition from one trend to another are characterized by an elevated volatility. The difference between the core CPI and the price index for motor fuel can be also accurately approximated by several straight lines. In 2008, the negative trend was replaced with a positive one, and thus, a very high volatility in motor fuel price was observed, with an extension into 2009. The change in the trend was accompanied by an “overshoot” in the price for motor oil, which dropped much lower than that expected from the new trend. Therefore, the difference has to return to the new positive trend in 2009. During the recovery period, the index for motor fuel will grow by 90 units or 50%. 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. Therefore, the fair price is not a fixed value but a linear function of time.

Suggested Citation

  • Kitov, Ivan & Kitov, Oleg, 2009. "A fair price for motor fuel in the United States," MPRA Paper 15039, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:15039
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    File URL: https://mpra.ub.uni-muenchen.de/15039/1/MPRA_paper_15039.pdf
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    References listed on IDEAS

    as
    1. Ivan O. Kitov, 2006. "Inflation, unemployment, labor force change in the USA," Working Papers 28, ECINEQ, Society for the Study of Economic Inequality.
    2. Ivan O. Kitov & Oleg I. Kitov, 2008. "Long-Term Linear Trends In Consumer Price Indices," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(2(4)_Summ).
    3. Ivan, Kitov, 2006. "Exact prediction of inflation in the USA," MPRA Paper 2735, University Library of Munich, Germany.
    4. Kitov, Ivan, 2007. "Inflation, unemployment, labor force change in European countries," MPRA Paper 14557, University Library of Munich, Germany.
    5. Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2007. "Inflation as a function of labor force change rate: cointegration test for the USA," MPRA Paper 2734, University Library of Munich, Germany.
    6. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Japan," MPRA Paper 5464, University Library of Munich, Germany.
    7. Kitov, Ivan & Kitov, Oleg, 2009. "Unemployment and inflation in Western Europe: solution by the boundary element method," MPRA Paper 14341, University Library of Munich, Germany.
    8. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Germany," MPRA Paper 5088, University Library of Munich, Germany.
    9. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Canada," MPRA Paper 5015, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. Kitov, Ivan, 2010. "Modeling share prices of banks and bankrupts," MPRA Paper 21369, University Library of Munich, Germany.
    2. Kitov, Ivan, 2009. "ConocoPhillips and Exxon Mobil stock price," MPRA Paper 15334, University Library of Munich, Germany.
    3. Kitov, Ivan & Kitov, Oleg, 2009. "Predicting share price of energy companies: June-September 2009," MPRA Paper 15863, University Library of Munich, Germany.
    4. Kitov, Ivan, 2012. "ConocoPhillips’ share price model revisited," MPRA Paper 38261, University Library of Munich, Germany.
    5. Kitov, Ivan, 2009. "Predicting the price index for jewelry and jewelry products: 2009 to 2016," MPRA Paper 15875, University Library of Munich, Germany.
    6. Kitov, Ivan & Kitov, Oleg, 2009. "PPI of durable and nondurable goods: 1985-2016," MPRA Paper 15874, University Library of Munich, Germany.
    7. Ivan O. Kitov & Oleg I. Kitov, 2010. "Crude oil and motor fuel: Fair price revisited," Papers 1005.0051, arXiv.org.
    8. Kitov, Ivan & Kitov, Oleg, 2009. "Sustainable trends in producer price indices," MPRA Paper 15194, University Library of Munich, Germany.
    9. Kitov, Ivan, 2009. "Predicting gold ores price," MPRA Paper 15873, University Library of Munich, Germany.
    10. Kitov, Ivan & Kitov, Oleg, 2009. "Modelling of selected S&P 500 share prices," MPRA Paper 15862, University Library of Munich, Germany.
    11. Kitov, Ivan, 2015. "Modeling the price of crude oil and motor fuel: a five-year revision," MPRA Paper 62338, University Library of Munich, Germany.

    More about this item

    Keywords

    CPI; motor fuel price; prediction; US;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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