AID17543: Historically, diesel has mostly been cheaper than petrol in South Africa,
though this has not always been the case, and not a trend seen around the
world. One of the key differences in the pricing of diesel versus petrol, is
that diesel prices reflect wholesale prices, not the price you would pay at the
pumps. For example, the wholesale inland diesel price for August was at R10.96
at the beginning of the month, while Caltex’s retail version – Caltex 50 diesel
with Techron – sells at R11.33 per litre. Over the past decade, both the petrol
and diesel prices have seen some significant fluctuations, but petrol (95
grade) has seen the biggest overall increase, having jumped 75.4% since 2006.
The
graph and table below show how the prices have changed year-on-year, between
August 2006 and August 2016.
The
fuel price is affected by two major components: the global oil price, and the
currency exchange rate between the rand and the dollar. Between 2014 and 2016,
fuel prices (both diesel and petrol) have shown a year-on-year decline, boosted
by a much lower global oil price, which has dropped below $50 a barrel, with
little hope that it will balloon past that level in the near future. However,
much of the benefit delivered by lower oil prices has been undone by weakness
in the rand – brought about by a struggling economy, poor growth policies and a
number of political scandals involving president Jacob Zuma.
(Source: https://businesstech.co.za/news/energy/134400/petrol-vs-diesel-prices-in-south-africa-2006-2016/)
a.
Explore the trend in the petrol price (for both unleaded 93 and unleaded 95)
using regression trend analysis. Using the data, forecast the petrol price for
2017, 2018 and 2019.
b.
Explore the trend in the diesel price using regression trend analysis. Using
the data, forecast the diesel price for 2017, 2018 and 2019. Out of the three
regression models, which model is the strongest in predicting the fuel price?