Oil prices have increased a great deal in the last decade. The table below shows the average oil price for each year since 1949. Many companies use oil products as a resource in their own business operations (like airline firms and manufacturers of plastic products). Managers of these firms will keep a close watch on how rising oil prices will impact their costs. The interest rate in the PV/FV equations can also be interpreted as a growth rate in sales, costs, profits.
Average Oil Prices

a. Using the 1949 oil price and the 1969 oil price, compute the annual growth rate in oil prices during those 20 years.
b. Compute the annual growth rate between 1969 and 1989 and between 1989 and 2012.
c. Given the price of oil in 2012 and your computed growth rate between 1989 and 2012, compute the future price of oil in 2015 and2020.

  • CreatedSeptember 23, 2014
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