Watching the CNN coverage of President Obama’s press release earlier today got me thinking: I hear all the time about how demand for oil is at a record high, but no one has ever bothered to show me what the correlation is between oil demand and prices at the pump. It wouldn’t be hard to do. Presumably, if the data show a general increase in demand (which will henceforth be called consumption, as that is the industry term), then the data will also show a general increase in price. Now to be clear, it is possible that consumption and price both increase over a period of time, yet no cause-and-effect relationship exists. This is, however, unlikely.
So I set out to find this correlation. Using data from the Bureau of Labor Statistics and the U.S. Energy Information Administration, I made four simple plots.
You can see Price vs Consumption and Production:
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