Oil: Inflation adjusted

Here’s a terrific chart from our friends over at Chart of the Day.

oil_infl_adj_20040818

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.

What's been said:

Discussions found on the web:
  1. camille roy commented on Aug 18

    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!

  2. Mike commented on Aug 18

    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.”

  3. brian commented on Aug 18

    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.

  4. david commented on Aug 19

    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.

  5. Sus_Ano commented on Aug 19

    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…

  6. Barry Ritholtz commented on Aug 19

    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 . . .

  7. Kevin commented on Mar 3

    Actually, I found this oil price graph today using Google and found it to be quite interesting/useful. Thanks!

  8. steve even commented on Sep 15

    i hate gasolion pirates they are gay. and so are the iraqy bitches that control the oil in iraq.

  9. Emmy commented on Jul 14

    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*.

  10. William commented on Jul 26

    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.

  11. Erik Peterson commented on Nov 2

    96$ a barrel … closing in on inflation adjusted highs very quickly. better pack up and head for the hills…

  12. Mamadi commented on Mar 11

    What are you guys saying now? 🙂

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