Hopefully this is my last post of the week on gas prices. There seems to be an underlying theme to all of the gas price talk this week that somehow U.S. Energy Policy and U.S Oil companies are responsible for gas prices. So I decided to take a look at the gas prices in Europe. Not because they are higher in than prices in the U.S., but because changes in the price of gas in Europe are almost perfectly correlated with changes in the price of gas in the U.S. Click on the image to see the graph taken ffrom DOE-EIA numbers.
I calculated the simple correlation coefficients between U.S. and select European country gas prices (those on the graph) between 2001 and 2006 and they all fall between .9 and 1. So, either U.S. energy policy and U.S. oil companies' greedy behavior have an overwhelming effect on world gas prices, or U.S. gas prices react overwhelmingly to global supply and demand conditions. I vote for the latter.
