In 2015, Mariam, an engineer with Total Petro­leum, decided to invest in stocks of a corporation that concentrates on crude oil production and re­fined products, though the price of oil is a very volatile commodity during recent years. She found the Global Crude Oil Index (GCO Index as shown in Table 15–3) on the web, plus the recorded annual prices (in dollars per barrel, $/bbl, as of December of each year) for two very well-known oil categories—Brent-Europe (B-E) and West Texas In­termediate (WTI). The data for all three are presented below for the period 2008 through 2015. The GCO Index has a base year of 2005 of 100 points.

Question

Use the cost index equation to do the following:

(a) Predict the price for years 2008 through 2015 for both B-E and WTI crude.

(b) Develop a spreadsheet line graph for the Brent-Europe recorded and predicted price from 2008 to 2015.

(c) Develop a spreadsheet line graph for the West Texas Intermediate recorded and predicted price from 2008 to 2015.

(d) Which of the two categories of oil does the index appear to track more closely?

Answer 1

(a) Use Equation [15.2] to predict prices with 2008 as the C0 ($35.82 for B-E and $44.60 for WTI). For example, prediction for WTI for 2011 is



C2011 = C2008(I2011/I2008)

= 44.60(194.4/105.1)

= $82.50



(b) Graph shows year versus recorded and predicted Brent-Europe prices



(c) Graph shows year versus recorded and predicted WTI prices

(d) WTI crude prices are tracked more closely