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Consumer Price Indices for Gasoline and Electricity in Canada Research Paper

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Updated: Jul 12th, 2021

The purpose of the study is to examine trends and patterns of the variation in the consumer price indices (CPI) for gasoline and electricity in Canada. CPI is an integral economic indicator used in the assessment of the inflation rate of a country and the cost of living among consumers. Trends and patterns of CPI reflect the variation in inflation and consumer rates. In this case, the study collected CPI for gasoline, electricity, and all items because they are values that relate to the consumption of energy in Canada. The data for gasoline CPI represented the non-renewable market, whereas the data for electricity exemplified the renewable market of energy in Canada. According to Natural Resources Canada (2013), Canada produces 63% of its electricity from renewable sources of energy, mainly from hydroelectric power plants. Among countries of the Organization for Economic Cooperation and Development, Canada is the second leading consumer of gasoline, a non-renewable form of energy, in the transport and manufacturing industries (Moshiri & Aliyev, 2017). For comparative analysis, CPI for all items was also used in the study. The selected variables are significant because economists employ CPI in predicting inflation and purchasing powers of consumers in various markets, represented by different categories of products and services.

Data

The selected data comprised CPI for gasoline, electricity, and all items commonly purchased in Canada. In the selection process, CPI variables and their annual frequencies were searched and then retrieved from an online database (Statistics Canada, 2019). The online database is suitable because it contains valid and accurate economic data for reliable decision-making. Given that the database has diverse forms of data, the appropriate variables of CPI were downloaded in the format of.csv and saved in.xlsx in MS Excel. Subsequently, these variables were filtered in MS Excel and CPI for gasoline, electricity, and all items were selected. Since the selected data comprised of time series from 1949 to 2018, the recent data from 1980 was chosen for analysis (Appendix). Moreover, a composite index for gasoline, electricity and all items was calculated by averaging their indices and using 1980 as the base year. Individual or composite CPI for gasoline, electricity, and all items are important economic indicators in the Canadian economy since they reflect variations in prices, inflation, and purchasing powers of consumers over time.

Analysis

Central Tendency

The measures of central tendency (Table 1) were used to calculate typical CPI values for gasoline, electricity, all items, and the average index.

Table 1. Measures of Central Tendency.

Gasoline CPI Electricity CPI All Items CPI Average Index
Mean 107.79 93.48 93.83 98.37
Median 85.20 90.80 92.90 89.53
Count 39 39 39 39

The means of CPI for gasoline (M = 107.79) is the highest followed by those of average index (M = 98.37), all items (M = 93.83), and electricity (M = 93.48). These findings indicate that the price of gasoline increased by an average of 7.79%, whereas those of average index, all items, and electricity decreased by mean values of 1.63%, 6.17%, and 5.62%, respectively. Moreover, medians show that CPI for gasoline (85.20), electricity (90.80), all items (92.90), and average index considerably exhibited deflation in prices for the last 39 years (1980-2018).

Figure 1 shows increasing trends of CPI for gasoline, electricity, all items, and the average index from about 40% in 1980 to approximately 150% in 2018.

Trends of CPI for gasoline, electricity, all items, and average index in Canada.
Figure 1. Trends of CPI for gasoline, electricity, all items, and average index in Canada.

The analysis of patterns shows that gasoline had significant fluctuations since 2003, while electricity and average index depicted small variations. Low CPI experienced in 2009 and 2016 is due to declining oil prices and adverse economic growth (Dawson, 2018). Comparatively, the trend line of CPI for all items remained steady over time, depicting a positive and consistent drift. Blatchford (2019) reports that the inflation rate is high because Canadians pay for increased prices in air transport, vegetables, and gas by 28%, 15%, and 8%, respectively. Thus, the CPI forecast depicts that the inflation rate in Canada will continue to increase until the economy registers stable growth.

Composite CPI

Figure 2 indicates an increasing trend of composite CPI from 100% in 1980 to the current value of about 380% in 2018. The trend implies that the current CPI in Canada has increased by about four times (380%) since 1980. The prices of energy, both gasoline and electricity, have increased in response to the economic growth, as well as due to increasing income level and expenditure among Canadians (Natural Resources Canada, 2013; Moshiri & Aliyev, 2017). The apparent fluctuations tend to follow the trend of global oil prices when compared to the prices of other products in the market.

The trend of Composite CPI.
Figure 2. The trend of Composite CPI.

Conclusion

The consumer price index plays a central role in economics because it indicates the degree of inflation and depicts variations in the purchasing power of consumers. The analysis of Canadian CPI shows that the mean of gasoline CPI is higher than that of electricity. Trend analysis indicates that CPI for gasoline, electricity, average index, and all items have been increasing and fluctuating since 1980. The trend of the composite index indicates that CPI has increased by about 400% since 1980 with significant fluctuations tallying with recessions in oil prices. Thus, the findings suggest that CPI for gasoline is more volatile when compared to that of electricity or composite index.

References

Blatchford, A. (2019). The Financial Post. Web.

Dawson, T. (2018). The National Post. Web.

Moshiri, S., & Aliyev, K. (2017). Rebound effect of efficiency improvement in passenger cars on gasoline consumption in Canada. Ecological Economics, 131, 330-341. Web.

Natural Resources Canada. (2013). Web.

Statistics Canada. (2019). Web.

Appendix: Data

Year Gasoline CPI Electricity CPI All Items CPI Average Index Composite CPI
1980 37.4 37.9 44 39.77 100.00
1981 50.9 41.2 49.5 47.20 118.69
1982 61.8 45.8 54.9 54.17 136.21
1983 65.6 49.8 58.1 57.83 145.43
1984 69.4 53.2 60.6 61.07 153.56
1985 73.5 55.7 63 64.07 161.11
1986 65.4 57.6 65.6 62.87 158.09
1987 68.5 60 68.5 65.67 165.13
1988 67.9 62.3 71.2 67.13 168.82
1989 72.1 64.8 74.8 70.57 177.45
1990 82.7 68.7 78.4 76.60 192.62
1991 81.5 78.6 82.8 80.97 203.60
1992 78.6 83.7 84 82.10 206.45
1993 77.4 87.2 85.6 83.40 209.72
1994 76.5 87.7 85.7 83.30 209.47
1995 80.1 87.3 87.6 85.00 213.75
1996 83.6 88.3 88.9 86.93 218.61
1997 85.2 89.3 90.4 88.30 222.05
1998 77.9 90.1 91.3 86.43 217.35
1999 84.9 90.8 92.9 89.53 225.15
2000 103.5 91.3 95.4 96.73 243.25
2001 100.8 92.9 97.8 97.17 244.34
2002 100 100 100 100.00 251.47
2003 106.4 98 102.8 102.40 257.50
2004 117.6 102 104.7 108.10 271.84
2005 132.6 104.9 107 114.83 288.77
2006 139.8 110.8 109.1 119.90 301.51
2007 146.1 112.9 111.5 123.50 310.56
2008 164.7 113.2 114.1 130.67 328.58
2009 135.8 115.2 114.4 121.80 306.29
2010 148.2 120.7 116.5 128.47 323.05
2011 177.8 124.3 119.9 140.67 353.73
2012 182.3 129.4 121.7 144.47 363.29
2013 183.4 132.3 122.8 146.17 367.56
2014 183.8 138.4 125.2 149.13 375.02
2015 153.4 142.9 126.6 140.97 354.48
2016 144.2 151.1 128.4 141.23 355.16
2017 161.2 142.7 130.4 144.77 364.04
2018 181.5 142.8 133.4 152.57 383.65
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IvyPanda. (2021, July 12). Consumer Price Indices for Gasoline and Electricity in Canada. Retrieved from https://ivypanda.com/essays/consumer-price-indices-for-gasoline-and-electricity-in-canada/

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"Consumer Price Indices for Gasoline and Electricity in Canada." IvyPanda, 12 July 2021, ivypanda.com/essays/consumer-price-indices-for-gasoline-and-electricity-in-canada/.

1. IvyPanda. "Consumer Price Indices for Gasoline and Electricity in Canada." July 12, 2021. https://ivypanda.com/essays/consumer-price-indices-for-gasoline-and-electricity-in-canada/.


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IvyPanda. "Consumer Price Indices for Gasoline and Electricity in Canada." July 12, 2021. https://ivypanda.com/essays/consumer-price-indices-for-gasoline-and-electricity-in-canada/.

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IvyPanda. 2021. "Consumer Price Indices for Gasoline and Electricity in Canada." July 12, 2021. https://ivypanda.com/essays/consumer-price-indices-for-gasoline-and-electricity-in-canada/.

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IvyPanda. (2021) 'Consumer Price Indices for Gasoline and Electricity in Canada'. 12 July.

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