Analysis of the Trends in Domestic Prices of Petroleum Products in Sri Lanka

Abstract

Crude oil plays a crucial role as a commodity with significant global economic implications. This research project aimed to identify predictive models for forecasting future oil prices in Sri Lanka, utilizing monthly data spanning over 32 years. The analysis involved examining monthly Domestic Prices for five petroleum products, Lanka Petrol 95 (LP95), Lanka Petrol 92 (LP92), Lanka Auto Diesel (LAD), Lanka Super Diesel (LSD), and Lanka Kerosene (LK) covering the period from 1990 to 2021. Three popular time series trend models, namely, Linear Trend Model (LTM), Quadratic Trend Model (QTM) and Exponential Growth Model (EGM), were used on the five petroleum product types. Furthermore, the fitted models were further assessed to find the best fitted models for each type of petroleum product using accuracy measures such as Mean Squared Deviation (MSD), Mean Absolute Deviation (MAD), and Mean Absolute Percentage Error (MAPE). According to the trend analysis results, the exponential growth model was the most suitable for LP95, LP92, LAD, LSD and LK. The results of the study offer practical implications for stakeholders in the Sri Lankan petroleum industry, enabling them to make informed decisions in a volatile global market.