Two Common Questions

Over the past few weeks, gasoline prices have been a frequent conversation topic. The rapid rise in prices has hit most of us in the pocketbook, and it has caused wannabe economists such as myself to ponder the relationship between oil and gasoline prices.

In this post, I’m going to look at two common questions to see if we can reach any conclusions.

Question #1: What is the relationship between Oil Prices and Gasoline Prices?

This is a relatively easy question to answer. The data on oil prices is available on the EIA website, and the same website has data on retail gasoline prices for a variety of cities and regions. Since I am a Chicago resident, I chose to run the regression using the retail gasoline price series for Chicago.

This plot shows the last seven years of oil and gasoline prices. The blue dots are the weekly price data points and the red line is the fitted regression line.

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