Petroleum Economics - Economic Dynamics of the Domestic Demand for Motor Fuel (T. P. 1174, With discussion)

The growth of domestic requirements for motor fuel has been phenomenal, rising year after year in a fashion almost unique among commodities, resisting depressions and forging rapidly ahead in times of prosperity. Consumption advanced from 226 millions of barrels in 1925 to 522 millions of barrels in 1938; or 130 per cent. The economic influences generating and sustaining this demand are of vital concern to the petroleum industry. The general factors affecting utilization of motor fuel are well known but it is the purpose of this paper to employ the recently developed technique of economic dynamics to describe them mathematically. Such problems in economic analysis are complicated by the freedom of all the variables to fluctuate, their mutual interdependence, changing incidence upon one another, and the nonquantitative character of some of them. Economic quantities and relationships, unlike those of the physical world, are continuously changing and this dynamic characteristic is both a distinguishing and confusing feature in economic research. The complexities of the problems require application of the analytical devices of mathematical statistics to uncover the probable relationships between factors. The procedure employed is to formulate a logical relationship linking the dependent to the independent variables, and then simultaneously, rather than sequentially, determine their separate effects by multiple correlation. This transformation of common knowledge to quantitative terms makes it possible to measure the probable effects of changing conditions upon requirements, assisting in the sound interpretation of economic policies. The utility of the results of such dynamic analysis is in sharp contrast to the sterility of the trends and other simple empiricisms of descriptive statistics. It is not intended in this study to throw light on the reasons why any motor fuel at all is consumed; but to discover relationships explaining why more was consumed at one time than at another. Specifically the problem is confined to the measurement of the influences of statistically