Tuesday, May 26, 2009
Crude Oil Prices Since 1861
Oil prices have an impact, no doubt, and the above chart attempts to show the impact against the broader scope of history. There are two ways to gauge the impact of an increase in prices, the real dollar level and the rate of increase in nominal terms. To do that I charted the average annual price since 1861 in 2007 dollars and the nominal price against a log scale.
In real dollar terms, the 2008 annual average of $97.26/barrel was the highest since the $107.38/barrel average set in 1864 ($93.08 in 1980). From a rate of change perspective the run ups during the Civil War and during the past couple of years were about the same. Neither period comes close to the rapid increase in the 1970s. That hit to the economy was much more devastating. We were paying an historically high price last year but coming from where oil prices were the economic impact wasn't nearly as great as when suit lapels were ridiculously wide.
The reason for bringing this up is that oil is back on the rise and while the increases have been modest to date the price of crude will accelerate to the upside within the next 6 months. There will be lots of talk about the real level being so high but because prices will be rising from current levels the negative impact on the economy will not be as great as the high price would indicate. Still, higher prices are higher prices and so this seems a good time to buy a hybrid car.