The Energy Information Administration (EIA), created by Congress in 1977, is a statistical agency of the U.S. Department of Energy. It provides data, forecasts, and analyses to promote sound policymaking and public understanding regarding energy and its interaction with the economy and the environment. One of the most important areas of analysis is petroleum. The file titled Crude contains data for the period 1995 through 2010 concerning the price, supply, and demand for fuel. One concern has been the increase in imported oil into the United States.
a. Examine the relationship between price of gasoline and the annual amount of imported crude oil. Construct a scatter plot depicting this relationship.
b. Determine the order of the polynomial that would fit the data displayed in part a. Express “Imports” in millions of gallons, i.e., 3,146,454 > 1,000,000 = 3.146454. Produce an estimate of this polynomial.
c. Is a linear or quadratic model more appropriate for predicting the price of gasoline using the annual quantity of imported oil? Conduct the appropriate hypothesis test to substantiate your answer.