AN EMPIRICAL MODEL OF THE RELATIONSHIP BETWEEN CRUDE OIL PRICE AND GAS CONSUMPTION, NATURAL GAS PRICE, AND COAL PRICE IN THE UNITED STATES

Morsheda Hassan
Wiley College
ABSTRACT
Crude oil is the main source for energy in the US and around the world. The price of oil
has a major effect on the US economy as well as the economies of other countries. Therefore, it is
of importance to investigate relationships between oil price and other key variables that would
help in predicting the price of oil. Different modeling approaches and forecasting models give
different results and the field is still open for investigation and improvement. In this study, the
authors use a variable selection regression approach to find an appropriate subset of variables,
from a pool of candidate regressors or independent variables, that relate significantly to crude oil
price as the dependent variable. Results showed that crude oil price is related to gas consumption,
natural gas price, and coal price.