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There is a
great deal of concern about heating oil in the Northeast.
Your job is to write a brief
paper developing and using a model of the heating oil market.
Fortunately, much of the data collection has already been done
for you.
The Petroleum Institute
has developed a supply equation that relates the quantity supplied to
the price of heating oil (P) and
the price of crude oil (PC). The
equation is:
Q =
40 + 18P-2.5PC
The enclosed data has
been collected from different areas of New England over the past few
years. You should be able
to use this data to develop a demand equation.
Once you have developed
your model use it to examine:
-
the impact of OPEC increasing the price of crude oil from
$12 a barrel to as much
as $30 a barrel;
-
the
impact of a 10-20% increase in heating degree
days;
-
a
worst case scenario involving the above two impacts;
-
a
best case scenario.
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