Bus308: Statistics for Managers - Final Paper
Gas Prices
Nathaniel Peters
BUS 308: Statistics for Managers
Instructor: Ali Choudhry
August 8, 2011
Gas Prices Delivery service is a way of life. Each day, people get packages sent to them by way of this service. But few people think of the costs the delivery company has to deal with. One of the main operating costs that we as a delivery company have is gasoline. We use gasoline daily in massive quantities. The cost of gas affects American’s daily, and people can be heard complaining about the high prices. What about delivery companies? In this paper, we will be discussing the effect of rising gas prices on our company throughout the next ten years. Gas prices change daily, and throughout the year it is amazing to look at the monthly averages changing. In 2008 these averages varied from a low of 1.689 to a high of 4.09. That is a difference of 2.401, a huge difference within one year. So what is it that makes gas prices change so drastically? There is a formula of sorts to consider regarding why we pay what we pay for gasoline. The formula is: crude oil + refining process + retail sales/distribution + taxes = gasoline price. A good example of a sudden price change can be found in Hurricane Katrina. Many oil refineries and drilling operations were wiped out because of the hurricane, causing a spike in the gasoline prices because of the sudden decrease in supply. (Roy, 2010) We at the delivery company have put together a data set to help report on the effects of this situation. We began by compiling average gas price by month and year. The yearly values were then used to create a scatter plot so that we could see the price differentials in a visual format. Then, a linear regression line was added to show the increase throughout the years in a linear fashion, thereby helping us determine where the prices will average out to in the years to come. There are, of course, things that may greatly change the course of the linear regression line that cannot
Nathaniel Peters
BUS 308: Statistics for Managers
Instructor: Ali Choudhry
August 8, 2011
Gas Prices Delivery service is a way of life. Each day, people get packages sent to them by way of this service. But few people think of the costs the delivery company has to deal with. One of the main operating costs that we as a delivery company have is gasoline. We use gasoline daily in massive quantities. The cost of gas affects American’s daily, and people can be heard complaining about the high prices. What about delivery companies? In this paper, we will be discussing the effect of rising gas prices on our company throughout the next ten years. Gas prices change daily, and throughout the year it is amazing to look at the monthly averages changing. In 2008 these averages varied from a low of 1.689 to a high of 4.09. That is a difference of 2.401, a huge difference within one year. So what is it that makes gas prices change so drastically? There is a formula of sorts to consider regarding why we pay what we pay for gasoline. The formula is: crude oil + refining process + retail sales/distribution + taxes = gasoline price. A good example of a sudden price change can be found in Hurricane Katrina. Many oil refineries and drilling operations were wiped out because of the hurricane, causing a spike in the gasoline prices because of the sudden decrease in supply. (Roy, 2010) We at the delivery company have put together a data set to help report on the effects of this situation. We began by compiling average gas price by month and year. The yearly values were then used to create a scatter plot so that we could see the price differentials in a visual format. Then, a linear regression line was added to show the increase throughout the years in a linear fashion, thereby helping us determine where the prices will average out to in the years to come. There are, of course, things that may greatly change the course of the linear regression line that cannot
References: 1. Roy, R. (2010). Why does gas cost so much? Retrieved August 7, 2011 from http://autos.aol.com/article/why-gas-costs-so-much/. 2. Kilian, Lutz. Explaining fluctuation in gasoline prices: a joint model of the global crude oil market and the U.S. retail gasoline market. Energy Journal, 2010, Vol. 31 Issue 2. Retrieved August 8, 2011 from http://web.ebscohost.com/ehost/. 3. Atkinson, B.; Eckert, A.; West, D. Price matching and the domino effect in a retail gasoline market. Economic Inquiry, July 2009, Vol. 47 Issue 3. Retrieved August 8, 2011 from http://web.ebscohost.com/ehost/.