Oil: Inflation adjusted
Here's a terrific chart from our friends over at Chart of the Day.
When you adjust the price of oil (and thus, gasoline) for inflation, relative to the past its merely more expensive than it was -- but not outrageously so. Indeed, energy now consumes about 2-3% of GDP, down from 15% (if memory serves me) 30 years ago.
Wednesday, August 18, 2004 | 06:37 AM | Permalink
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In a way this is discouraging because it says that oil prices are high enough to slow our economy but too low to encourage conservation and alternative energy development. The worst of both worlds!
Posted by: camille roy | Aug 18, 2004 1:55:18 PM
I'll say this again -- what this really illustrates is just how little folks pay attention to the other inflation we live with. Instead of saying "the price of oil isn't that bad when adjusted for inflation" what it's really saying is "hey if you think the price of oil is high, just look at the price of everything else you buy!".
Even though oil is cheaper now (inflation adjusted) and we use less of it (when compared to GDP), it exposes how highly leveraged our economy is to the resource. Let me quote from http://www.fullermoney.com/content/2004-06-29/EconomicDevelopmentsLeavingExperts290604.pdf
"When one hears the numbers which show the U.S. economy currently squeezes more than twice the amount of real GDP from a barrel of crude oil than it was able to in the 1970's, the distinct impression of less dependence upon crude oil is conveyed... [The US] has pumped up its level of real GDP to the enormous size we see today, but with crude oil still inseparably intertwined at virtually every level of economic activity. As such, by squeezing more than twice the real GDP from every barrel of crude oil, the U.S. has dramatically increased the leverage that each barrel of crude oil enjoys over the GDP."
Posted by: Mike | Aug 18, 2004 4:21:22 PM
From a low of around $15 in 1999 oil has more than tripled to $47. No wonder that the US economic recovery has been so tepid as dollars that could have gone to domestic consumption activities is being diverted to the OPEC cartel.
Posted by: brian | Aug 18, 2004 9:32:55 PM
Goin' old school on some of your butts ... look at the US Stats History Colonial Times to Present (vols 1&2) look up the price of oil (v 2 as I recall) and the CPI (v 1). The real price of oil was higher in the 1850's than it is today or even 1980!
Barry, keep up the blog. I work at a hedge fund in london and start my day w/ you and coffee. Might have to cut you in on the performance fee.
Posted by: david | Aug 19, 2004 2:48:56 AM
Say doesn't this graph also show that when the price of oil hits the $38 to $45 range the economy falls into a recession? And isn't the price already PAST the point most of the recessions begin? It looks like the only two data points that are higher the crisis in Iran and Gulf war I...
Posted by: Sus_Ano | Aug 19, 2004 3:25:43 AM
To Sus_Ano --its inflation adjusted, so you shouldn't use hard numbers (versus relative $s)
To David: How relevant was oil to the US economy in 1850? Its price was utterly meaningless.
Stick to the 20th century for comparos regarding Petrol -- preferably post-War . . .
Posted by: Barry Ritholtz | Aug 19, 2004 11:31:49 AM
Actually, I found this oil price graph today using Google and found it to be quite interesting/useful. Thanks!
Posted by: Kevin | Mar 3, 2005 1:41:25 PM
i hate gasolion pirates they are gay. and so are the iraqy bitches that control the oil in iraq.
Posted by: steve even | Sep 15, 2005 11:53:23 AM
Well, I found this graph *today* and found it quite interesting, here in the future. So, for anyone who's here right now, the price on July 13, 2006 passed $78/bbl. (You can pretty much just extrapolate a straight line up--don't bother with the "reasons" or slight "peaks" at this point, since we're probably at the *real* Peak now. The Media, of course, continue to give a different "reason" every day for the relentless increases. Today it was: violence in the Middle East. Boy howdy, who woulda seen *that* coming??) Presumably, if you are reading this in the near future, the price will have exceeded the 1980 price. If you're in the far future...well, forget that, since, after Peak Oil, which is probably upon us, the server on which this data resides will have long ago been converted back to its original elements, and the Internet will once again be the province of a very few--and not the likes of us. *Sigh*.
Posted by: Emmy | Jul 14, 2006 12:00:47 AM
And one year after Emmy's comment... prices are still hovering near $80. They aren't going back down anytime soon unless a global depression, conservation, or alternative fuels depress consumption.
Posted by: William | Jul 26, 2007 1:00:28 PM
96$ a barrel ... closing in on inflation adjusted highs very quickly. better pack up and head for the hills...
Posted by: Erik Peterson | Nov 2, 2007 6:44:13 PM
What are you guys saying now? :)
Posted by: Mamadi | Mar 11, 2008 11:01:25 PM
