Oil Prices

Oil Prices

For this assignment, I decided to talk about oil prices. First of all, I would like to point out the fact that oil is an essential resource in our economy. Also oil is one of the most important industries in Alberta.

 

Oil Prices Chart

In the following table, we can see the oil prices for the last thirteen months including April. By looking at the data we can see that there is a significant difference between last year and this year price. The highest price was on June 1, 2014 (Month 2) at $105.37 per barrel. The lowest price was on March 1, 2015 (Month 11) at $47.60 per barrel. The average price was $76.49 per barrel.

Month	Date	Price
0	2014-04-01	$   99.74
1	2014-05-01	$ 102.71
2	2014-06-01	$ 105.37
3	2014-07-01	$   98.17
4	2014-08-01	$   95.96
5	2014-09-01	$   91.16
6	2014-10-01	$   80.26
7	2014-11-01	$   66.64
8	2014-12-01	$   54.96
9	2015-01-01	$   50.07
10	2015-02-01	$   52.14
11	2015-03-01	$   47.60
12	2015-04-01	$   49.53

After analyzing the prices on the table for the indicated months it is obvious that the price has dropped by $50.21 per barrel in the last year. This has a negative impact to the world’s economy because most industries relies on this resource.

Oil Prices Equation

Equation Type: Cubic Regression

Y = 0.1565x^3  +(-2.9026)x^2+ 8.3058x + 98.5614

The graph above shows the cubic function f(x) = 0.1565x^3  +(-2.9026)x^2+ 8.3058x + 98.5614. This function shows the decrease in oil price. We can see that the cubic regression is the one that best describes the data. There were many factors that caused the oil price to drop including supply in terms of output, access to future supply, and oil demand. The graph shows that on April 2014 the price per barrel was about $105.37/Barrel. By the end of 2014 the oil price went down to $54.96/Barrel. On March 2015, the price for oil hit its lowest mark in the past 7 years with $47.60/Barrel. Based on the graph, since the price reached the lowest price point we can predict that the price will bounce back up.

Change in price Chart

The following table is the change in dollars of the oil price for the past 13 months including April 2015. In the data, between July 2014 and January 2015 the price gap was -$55.30. This significant change in price worries the oil industry, mainly because profits will decrease and they might have to cut costs by laying off people, shutting down operations, and cancelling projects.   

Month	Date	Change in $
0	2014-04-01
1	2014-05-01	$            2.97
2	2014-06-01	$            2.66
3	2014-07-01	-$           7.20
4	2014-08-01	-$          2.21
5	2014-09-01	-$           4.80
6	2014-10-01	-$        10.90
7	2014-11-01	-$           13.62
8	2014-12-01	-$        11.68
9	2015-01-01	-$           4.89
10	2015-02-01	$            2.07
11	2015-03-01	-$           4.54
12	2015-04-01	$            1.93

Change in Dollars

Equation type: Cubic regression

Y = 0.0314x^3+(-0.2529)x^2  +(-1.4142)x + 2.5639

The graph above shows the cubic function f(x) =  0.0314x^3+(-0.2529)x^2  +(-1.4142)x + 2.5639 . After June 2014, there was an oil price constant decline until February 2015 where there was a little increase of $2.07. The price went down again for the month of March 2015, then on the beginning of April the price increased by $1.93. It is expected that the oil price should increase within the upcoming months.   

Pros & Cons of Current Oil Price trend

Pros

• Due to the low barrel price, gas prices will likely tend to go down.
• Products such as groceries, goods, etc. will tend to be cheaper to transport due to the low price in oil.
• Low oil prices also help to lower cost of living.

Cons

• Lay-offs in the oil industry.
• Weakens economies relying on the oil industry.
• Research for new energies started by Oil companies might not have enough profits to grant research. 

Conclusion

After reviewing and doing all the required analysis, we can conclude that oil prices have an impact in our economy and our daily lives. The low oil price has affected Alberta in general negatively. People are losing their jobs, local oil companies are losing profit, and the city’s economy is getting weaker. According to the graphs and the analysis made, we can deduct that they oil price will go up hopefully by the end of the year.

References

http://www.investing.com/commodities/crude-oil-historical-data

http://www.padowan.dk/download/

http://useconomy.about.com/od/commoditiesmarketfaq/f/oil_prices.htm

http://www.pragcap.com/the-pros-and-cons-of-collapsing-oil-prices-in-201s4

http://www.economicshelp.org/blog/11738/oil/impact-of-falling-oil-prices/