Estimation of Total Gas Consumption from the Price index of gas in TEXAS Harvard Case Solution & Analysis

Estimation of Total Gas Consumption from the Price index of gas in TEXAS Case Solution

Introduction with goals and objectives.

The aim of this research is to estimate the consumption pattern of the gas in Texas from the price index of different types of energy sources consumed on a daily basis. The need of the study persist with the growing consumption of gas in Texas. The increasing consumption is a caution sign for the state government to take action on this increasing consumption. The increasing consumption patterns will cause a decrease in natural resources. The need of research is to impose the importance of the utilization of natural resources through proper channel. The economic tools are seem helpful in order to decrease the consumption of gas in TEXAS.

Review of existing literature

United States is one of the biggest consumer of the gasoline. The demand for the gasoline is increasing with time. Like all other countries, the United States of America is also facing problems from the increasing consumption of the natural resources. The increase in the gas consumption will directly increase the prices of gas products. Texas is the second largest consumer of gas in US, after California. (OHPI, 2014)

The latest price index of regular gas shows that the price of regular gas is US $2.220 per gallon in the latest week of May, 2016. The price of the regular gas is US $2.240 per gallon in previous week, which shows a decline in the price of regular gas this week as compared to the previous week. A decline of 0.89% has been observed in price of the regular gas per gallon. (EIA, 2016)

According to economics’ cost and demand theory, demand is somehow dependent on cost of the good and services. The consumption of the gas is also somehow dependent on the price of the gasoline. The consumption of the gas is done by several methods. One of the method include, the gas being consumed by the transportation sector. The increase in decrease in the price of fuel greatly influences consumer behavior towards transport in US. The increase in use of transport also results in greater release of carbon emissions.(Brand)

The prices of fuel also affect the demand for transportation. The demand for fuel among motorists is observed to examine the effect of prices on fuel consumption and demand for transportation. There is large difference in the demand for the transportation in long term and short term price changes. The analysis shows that fuel prices greatly influence the fluctuation in the demand for transports.(Graham & Glaister, 2002)

The consumption of gas is also observed in the generation of other energies. There are several evidences present in the history of US that prove exploitation of natural resources in order to obtain the energies. Recently, the state of Texas made records in consumption of gas to generate electricity. The state utilizes most of the gas resources in order to fulfill the demands for electricity. (Chapa, 2015)

Texas is also on the list of worst states with respects to effective utilization of natural resources. The Texas Petro Index declined by approximately 32% in the 11th month of 2015 as compared to 10th month of 2014. The natural fuel resources like gasoline have started to decline. The economists found a way to expand gasoline resources in order to save resources for future generations by increasing the price of fuel products. If the framework of increase in prices is not applied soon, the stock for the natural resources will tend to contract.(TAEP, 2015)

Analytical and Empirical Frameworks

Analytical Framework

The figure illustrates the relationship between the gas consumption in Texas and prices of regular, mid grade, and premium gas. The value of gas consumption in Texas is examined by the increase or decrease in the gas prices of different variables. The contribution of each of the variable was verified in order to get an effective model for forecasting the gas consumption in Texas from various factors..................

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