Stochastic Modelling and Forecasting for LPG Prices: SARIMA Approach

Abstract

Liquefied Petroleum Gas (LPG) is a by product of crude oil and natural gas that is rich in hydrocarbons. LPG can be used for cooking, water heating, and space heating and drying. LPG allows the user to control the level of heat and ensures a clean cooking environment. This study examines to predict and forecast analysis for Chennai's monthly LPG prices from December 2013 to November 2021 through the Seasonal Autoregressive Integrated Moving Average (SARIMA) approach. The use of Mean Absolute Percentage Error (MAPE) and Bayesian Information Criterion (BIC) criteria for the fitted model considered appropriate LPG pricing. The best model to forecast the Gas Prices is SARIMA(0,1,1)(1,1,0)12. Based on the chosen model, it could be predicted that LPG price would increase to Rs. 1,308.75 in November 2023 from Rs. 900.20 in December 2021 in Chennai.