Oil Prices Peak? Well, No.

Note to world: don’t compare oil prices without adjusting for inflation.

Oil prices soared to a new record high over $59 a barrel on Monday, extending last week’s surge as a threat against Western consulates in OPEC member Nigeria jolted traders already worried about tight supplies.

Oil prices climbed more than 9 percent, or nearly $5, last week, drawing additional buying interest from trend-following hedge funds as they surpassed the previous early April high.

Boston.com: Oil scales new peak, eyes $60 on demand

What Reuters fails to mention is that $60 in 2005 isn’t worth $60 in 1981. In 1981, oil prices reached their all time high of $39 (1981 dollars). $39 in 1981 was worth what $94.48 is worth in 2005. So you tell me… which is bigger: $94.48 or $60.00?

What we have now is a 13-year peak. This is the most that a barrel of oil has cost, in real dollars, since 1992.

Here’s a picture, for those who have problems understanding.

Comments

  1. Dave says

    So you tell me… which is bigger: $94.48 or $60.00?

    Doesn’t that depend on the circumference?

  2. zev says

    I am fascinated with this question. I do a google search and cannot find anyone who has a shadow of a doubt in the peak of oil production. I read a National Geographic, and I filtered out all the factless drama of most of the article, and pieced together what actual facts I could find about consumption, production, and the future of oil and did not see a glaring problem. I saw so much needless and dishonest hype in that article. Very sad. I’m suprised they didn’t include a close-up of an oily baby seal just to rub it in.

Trackbacks

  5. [...] Tempus Fugit notes that oil prices are not at an all-time high when adjusted for inflation: What Reuters fails to mention is that $60 in 2005 isn’t worth $60 in 1981. Suddenly I don’t feel so bad about filling up the minivan… [...]

  6. [...] According to Tempus Fugit, oil prices, while high, are not at an all time high – as those in the MSM would have you believe.Adjusted for inflation, oil is the most expensive it has been in 13 years. The most expensive it has been was in 1981 – $94.48 per barrel in 2005 dollars. They even have graph. Check it out. [...]