Not all of my ideas merit publication in a journal. That's why blogs exist.  In this post, I would like to write about the City of Los Angeles' demand for gasoline.   After seeing our Controller speak about his open data policy, I went to this website  and downloaded every expenditure the City has made since 2011 on gasoline. The data provided the date, the quantity, the expenditure (and thus the price per gallon).  I merged to these data, weekly data for California on the price of gasoline.  From basic supply and demand this price of gasoline changes as world events unfold.    I sought to use these data to test:

1.  Does the City of California pay market rates for gasoline?
2.  Does the City purchase less when world shocks to gasoline raise the price?

For those who know some econometrics, I did two simple things;

1.  Correlate(City of Los Angeles weekly price of gasoline, State level price for gasoline in the same week)   and I found a very high correlation;

2.  Two stage least squares:     regress Quantity of gasoline =  a + b*price Los Angeles pays per gallon +  U

first stage:  Price Los Angeles pays =  c + d*state level price +  V

so I used the state level price as an instrument for the average price that LA pays and I found a fairly large negative price effect.

The weakness of my "study" is that I don't know the storage technology that the city of LA has. How much gas can it buy during times when the price is low and simply hold inventories? I also don't know how budgets work.  Do the guys making the procurement decisions get to keep $ they save by buying oil when it is cheap?

I had hoped to write a corruption note that the Government agencies are not responding to market incentives but this is false.

An extension would ask the following;  as the price of gasoline on the national market rises; the sellers of gas have an incentive to raise the price they charge the City of Los Angeles because otherwise they are throwing away revenue but what about the flip case? As the price of gasoline declines, does the non-profit City of LA aggressively seek out cheaper gasoline or does it "over-pay" in the short run because it is lazy?