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The Monthly Flocculation

of Gasoline Prices
Does time of year affect the price of gas?

12/19/2008
IB Math Studies
Sarah Beck
A. Statement of Task
The American Automobile Association (AAA) gives a daily American national
average of the fuel prices that are derived from credit card transactions from more
than 85,000 stations across the nation. Daily averages are able to inform the
consumer superficially in decisions of getting gas today or tomorrow. Daily averages
do not give the consumer a yearly outlook, which is the purpose of this
investigation. Monthly averages could help families and businesses save money
when they are planning a trip, that’s price is affected by the price of gasoline.

I plan to take national gasoline daily averages from a 10 year period, 1998-
2007, from the Energy Information Administration which has the official energy
statistics from the US government. From these daily averages, I plan to make
monthly averages. With the monthly averages, I will create a scatter plot,
containing a best fit line. Then, I will use the correlation coefficient to measure the
strength and the direction of a linear relationship between tw (U.S. Retail Gasoline
Prices, Regular Grade)o variables. I will also use the coefficient of determination
because it gives the proportion the variance (fluctuation) of one variable that is
predictable from the other variable. Using the slope of the best fit lines from the 12
months, I will compare them to the slope of the best fit line of all of the average gas
prices from 1998-2007 by their percentage differences. The comparison will show if
there is any correlation between gasoline and the month of year.

B. Data Collection
Y Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avera
ear ges
1 1.13 1.08 1.04 1.05 1.09 1.09 1.07 1.05 1.03 1.04 1.02 0.98 1.05933
998 1 2 1 2 2 4 9 2 3 2 8 6 3
1 0.97 0.95 0.99 1.17 1.17 1.14 1.18 1.25 1.28 1.27 1.26 1.29 1.16508
999 2 5 1 7 8 8 9 5 4 4 8 3
2 1.30 1.36 1.54 1.50 1.49 1.61 1.59 1.51 1.58 1.55 1.55 1.48 1.51
000 1 9 1 6 8 7 3 2 9 5 9
2 1.47 1.48 1.44 1.56 1.72 1.64 1.48 1.42 1.53 1.36 1.26 1.13 1.461
001 2 4 7 4 9 2 7 1 2 3 1
2 1.13 1.13 1.24 1.40 1.42 1.40 1.41 1.42 1.42 1.44 1.44 1.39 1.3575
002 9 1 7 1 4 2 3 2 9 8 4
2 1.47 1.64 1.74 1.65 1.54 1.51 1.52 1.62 1.72 1.60 1.53 1.49 1.59075
003 3 1 8 9 2 4 4 8 8 3 5 4
2 1.59 1.67 1.76 1.83 2.00 2.04 1.93 1.89 1.89 2.02 2.01 1.88 1.88016
Formula for linear regression
Slope:
(best fit line) y = mx + b
004 2 2 6 3 9 1 9 8 1 9 2 7
2 1.82 1.91 2.06 2.28 2.21 2.17 2.31 2.50 2.92 2.78 2.34 2.18 2.29533
005 3 8 5 3 6 6 6 6 7 5 3 6 3
2 2.31 2.31 2.40 2.75 2.94 2.91 2.99 2.98 2.58 2.27 2.24 2.33 2.58891
006 5 1 7 7 7 9 5 9 2 1 4 7
2 2.27 2.28 2.59 2.86 3.13 3.05 2.96 2.78 2.78 2.79 3.06 3.02 2.80058
007 4 5 2 2 1 2 9 3 9 3
T 1.54 1.58 1.68 1.80 1.87 1.86 1.84 1.84 1.87 1.81 1.77 1.72 1.77086
ota 92 46 33 98 62 03 94 66 72 68 56 14 7
l
Av.

C. Analysis
This section contains a short review of the type of math used during the
analysis portion of this investigation. Also included are a few definitions in order to
demonstrate a clear and understandable experiment.

n( xy) - ( x)(
y)
slope = n( x ) - ( x)2
2
=
m

y - m(
x)
intercept n
=
=b

Here, means "the sum of." Therefore, I created a chart to organize my


variables. Below is an example of January’s data.
Key:
=.1393454545
to =
x astherefore,? 0.139. 0.7828 ? 0.783
the year
10 terms; n=10
y as to the average monthly price

x y xy x2

1 1.131 1.131 1
2 0.972 1.944 4
3 1.301 3.903 9
4 1.472 5.888 16
5 1.139 5.695 25
6 1.473 8.838 36
7 1.592 11.14 49
4
8 1.823 14.58 64
4
9 2.315 20.83 81
5
10 2.274 22.74 100
15.49 96.70 385
55 2 2

Therefore:

=
1
110(96.702) -
4(55)(15.492)
.=
slope = 910(385) - (55)2
m 6

8
2
5

y - m(
x)

intercept n
=
=b
15.492 -
0.139345454(55)
=
10

Therefore the slope of the line is: y= 0.139x + 0.783


Once in edit, I entered
First, my
I pressed x variables
the into L1. I then scrolled over to L2 and entered
STATcoefficient
button. my y variables
pressed enter, I had my correlation (r) and coefficient of determination (r2) for the month o
Next, I scrolled down to edit, then hit ENTER.

Then, I used my calculator to calculate the correlation coefficient and


coefficient of determination.
((1.770867
1.770867+– 1.5492)/2)
X 100
1.5492 = 13.4%
Meaning, 1.5492 is 13.4% below 1.770867; therefore, -13.4.

I then used the percentage difference equation to figure each month’s average
to the 10 year average.

Graphs:
Percentage Difference between the 10 Year Average and the 10 Year
Monthly Average

Month Percentage
Difference
January -13.4%
February -11.1%
March -5%
April +2.17%
May +5.78%
June +4.93%
July +4.34%
August +4.19%
September +5.83%
October +2.56%
November +2.67%
December +2.83%

D. Evaluation
The mathematical applications applied to this experiment illustrated that
there is some significant relation between the price of gasoline per gallon and the
time of year.

When looking at the percentage differences between the 10 year average


and the 10 year monthly average, it seems that there is a pattern to the price of
gas. For example, if we start from April, we can see a sharp increase of price in May,
then a slow decrease that lasts through August. Then, prices shoot up again, and
then decrease steadily until March of the next year.

I have hypothesized about why gas prices seem to have this cycle of price
fluctuation, which can be seen below.

Month Percentage Possible Reason For Fluctuation


Difference
April +2.17% Price ↑’s possibly because spring break (generally occurs in April) is
a large driving season.
May +5.78% Memorial day is a large driving holiday (approx 1/3 of Americans
travel to celebrate it). Increase of Demand=Increase in Price
June +4.93% Price ↓’s from May, but is still relativity high, possibly because June
is the first month of Hurricane Season
July +4.34% Price ↓’s from June, but remains above 4%, possibly because Fourth
of July is a large driving holiday.
August +4.19% Price ↓’s from July, but is still over 4%. This is possibly because
August is one of (if not the last) month of summer for students i.e.
Last minute travel.
Septemb +5.83% Price ↑’s possibly because all schools are back by this time, meaning
er that school busses are in operation for the first time since May. The
price is high, but will adjust over time. Also, The first day of
September is Labor Day, which is a large driving day.
October +2.56% Price ↓’s from September, possibly because October does not have
any large vacation and travel days.
Novembe +2.67% Price ↑’s possibly because families are traveling to other homes for
r Thanksgiving. Therefore, with a larger demand, a larger price.
Decembe +2.83% Price ↑’s possibly because families are traveling to other homes for
r Christmas. Therefore, with a larger demand, a larger price.
January -13.4% Price ↓’s from December, possibly because people must pay back
Christmas spending, therefore, cut back on gas.
February -11.1% Price ↓’s from January, possibly because there are not any significant
traveling holidays in February.
March -5% Price ↓’s from January, possibly because there are not any significant
traveling holidays in February.

My data in graphical form shows that year after year, there was a steady
increase in fuel prices per gallon. I also included the coefficient of determination (r2)
in order to show how well the measure of the regression line represents the data.
Because all of my coefficients of determination follow this value: 0.75 ≤ r2 < 0.90;
there is a strong correlation between my data and the best fit line. Having a strong
correlation is good because it shows that there was only a small room for error in
the best fit line.

There were, although, places in my experiment in where I possibly could have


improved. For example, my gasoline averages do not factor in inflation. Therefore,
the percent change between the 10 year average and the 10 year monthly average
could have been lower. Also, the averages were very geographically general.
Different regions of the United States will have different gasoline price averages. If
one was planning a trip, it would be more beneficial or them to use the gasoline
price averages, specific to the region they are traveling to, or regions they are
traveling through.

E. Sources

Affairs, Bureau of Consular. Hurricane Season - Know Before You Go. 3 December
2008
<http://travel.state.gov/travel/cis_pa_tw/hurricane_season/hurricane_season_2915.h
tml>.
U.S. Retail Gasoline Prices, Regular Grade. 3 November 2008
<http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_home_pa
ge.html>.