Determining the Global Pricing of Crude Oil Using Trend Analysis and Numerical Modelling

Eric Mensah Amarfio



Crude Oil affects almost all activities of our modern day hydrocarbon society. The ever increasing importance and demand of oil globally, has led to its highly complex market and pricing system. This paper investigates the factors that determine the prices of crude oil and the impact of these individual factors using regression and trend analysis. Crude oil prices along with other factors such as global and OPEC production rates, global oil consumption and refinery rates where studied from 1965 to 2015. The analysis employed a log-log multiple regression method using ordinary least squares, with oil price as the response variable and the other factors mentioned as predictor variables. The results from the regression analysis was complemented with trend analysis of these factors with oil prices. It was revealed from the results that all explanatory variables examined save natural gas consumption and wars were found to be significant in oil price determination. Global oil and OPEC’s production rates have a negative (inverse) relationship with oil price whilst consumption, the presence of wars directly relate to oil prices. That of refinery capacity however can be positive or negative.



Complex Market, Crude Pricing System, Multiple Regression, Analysis, Predictor Variables

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