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The Real Price of Oil
- CookieMon 11y ago> This measure, usually called the oil intensity of the economy... ...is calculated by dividing the total national oil consumption by GDP expressed in constant monies. So it's not taking into account the increased offshoring of our economy's oil and energy consumption, and the article chalks everything up to increases in efficiency (or switching to coal). http://ourfiniteworld.com/2011/11/15/is-it-really-possible-to-decouple-gdp-growth-from-energy-growth/ http://ourfiniteworld.com/2011/11/15/is-it-really-possible-t...
- barrkel 11y agoEconomic efficiency is basically GDP / input, with the input chosen by what you're trying to measure the efficiency of. It's extremely approximate as a measure of anything real. It's easily skewed because GDP isn't a particularly good measure to start with. It's hard to take measures that use GDP very seriously for countries with large offshore banking sectors, for example.
- rtpg 11y ago> Average prices of WTI rose roughly 52-fold between 1970 and 2014, in current dollars Surely that can't be right? Wouldn't that mean that 2014 price = 1970 * 2^(52) ?
- Turbo_hedgehog 11y agoNever. -fold is times, so it's 52x
- colechristensen 11y agohttp://www.etymonline.com/index.php?term=-fold&allowed_in_frame=0 http://www.etymonline.com/index.php?term=-fold&allowed_in_fr... Even though one might think it's 2^x (fold something in half twice and it's 4 times as thick, three times and it's 8, etc.) it's actually a rather archaic usage for multiplying.
- SamReidHughes 11y agoImagine a fan-fold.
- bottled_poe 11y agoI think the point is that the term is ambiguous.
- SamReidHughes 11y agoIt's not.
- AnimalMuppet 11y agoNo longer as common as it used to be, perhaps even archaic, but not ambiguous.
- QuantumRoar 11y agoWeird. I also learned that -fold is not the same as times. For example, cosmic inflation was 60-fold, not times. But when I look it up, it says -fold is equivalent to just a multiple.
- brc 11y agoThat is not inflation adjusted. Also 1970 is before the usd was taken off the gold standard, and the subsequent oil shocks that followed. Gold/oil has traded in a range that whole time, while gold/usd and oil/usd has changed, well, 52 times. Inflation adjusted today's prices are not that bad in comparison.
- unusximmortalis 11y agoFree markets, heh?
- pjc50 11y agoFunny you should say that, given that oil is the classic example of a market controlled by a cartel of non-free governments.
- ZenoArrow 11y agoOil cartels can exist without government intervention, the free market does not guard against collusion.
- baldfat 11y agoCollusion and Monopolies are the greatest enemies of a free market. Collusion and Monopolies = secretive agreements to limit Free Markets. Collusion and Monopolies happen all the time. The number one defender of Collusion and Monopolies seem to be mos tLibertarians.
- saltedshiv 11y agoThat's a mischaracterization. Many libertarians believe that perpetual monopolies cannot exist in a free market due to competition. So even though a cartel might form for some time or a company may hold a monopoly on a product, if the prices are not at true market value (too high, inflated, not competitive enough), a competitor will enter the space and undercut the monopoly. If you're interested in reading more on the topic, search for keywords: rothbard, myth of natural monopoly
- ZenoArrow 11y agoDoesn't work if the incumbent companies are selling natural resources and have access to all resources in question. To illustrate, imagine we were in a free market and I wanted to start an oil company to disrupt the prices of an oil cartel. How am I going to do that if I don't have any oil?
- SixSigma 11y agoI think one should consider that GDP itself is a grossly flawed metric.
- fulafel 11y agoThe real cost is in the externalities: CO2 emissions -> climate change -> costs
- robotkilla 11y agoAccording to a documentary I recently watched (Cowspiricy) the biggest cause of CO2 / deforestation / climate change is the agricultural industry - I need to research the numbers presented in the documentary as it was eye opening and I want to be sure I'm not just being sold a vegan agenda.
- chrismaeda 11y agoI've read a similar claim in The Omnivore's Dilemma by Michael Pollan. According to Pollan, most fertilizer is manufactured with petroleum-based energy, so our agriculture is driven by fossil fuel consumption; ie natural gas -> fertilizers -> corn. This is not necessarily a vegan agenda; Pollan says we should move to solar-based agriculture by feeding animals grass instead of corn, which should incidentally make the animals tastier and more nutritious.
- tslug 11y agoI haven't found any evidence refuting Cowspiracy's claims, unfortunately, which has cornered me into eating vegan for going on two weeks now. If healthy vegan food were subsidized as it should be, most of the issues with limited food/dish selection would probably be addressed in no time.
- robotkilla 11y agoI'm probably a horrible person for saying this, but I'm not going to change my diet for this as I don't think there will be a widespread vegan movement based around this (one large enough that will truly disrupt the system I mean). I think it has to become a political issue enforced with regulations.
- ilurk 11y agoExcuse my conspiracy theorist but this article almost sounds like PR. #1 World Oil Demand Still Growing http://www.schwab.com/public/schwab/nn/articles/Black-Dog-Are-Plunging-Oil-Prices-a-Positive-or-a-Negative http://www.schwab.com/public/schwab/nn/articles/Black-Dog-Ar... #2 The Dow Jones still looks pretty good despite the tumble to 2014 levels https://www.google.com/finance?q=INDEXDJX%3A.DJI&ei=flkKVsudGIjPUfCvhYAG https://www.google.com/finance?q=INDEXDJX%3A.DJI&ei=flkKVsud... #3 Shangai index it at 2014 EOY levels https://www.google.com/finance?q=SHA%3A000001&ei=mFsKVrjhEYuWUJyakNgF&hl=en https://www.google.com/finance?q=SHA%3A000001&ei=mFsKVrjhEYu... #4 Crude oil price is at 2009 and 2004 prices http://www.macrotrends.net/1369/crude-oil-price-history-chart http://www.macrotrends.net/1369/crude-oil-price-history-char... So either the oil price is being pushed down now, or it was pushed up before on multiple occasions, and will liked be pushed up again somewhere in the future.
- jdimov9 11y agoBoth. Saudi Arabia has been artificially inflating the price of oil for a number of years and is now artificially keeping it low to hurt competitors. Unfortunately for them, this is already hurting Saudi economy more than anticipated and is increasingly looking like a fatal mistake.
- progmal1 11y ago"#1 World Oil Demand Still Growing" I suspect the difference is that at a per GDP basis demand is not growing.
- Al-Khwarizmi 11y agoI see the point the author is trying to make, but in my view (disclaimer: not an economist) the presentation lacks rigor and can be misleading. If you adjust oil prices for the economic output that you get out of a barrel of oil, then you no longer have a price per barrel. You have the price of the oil needed to produce X dollars of GDP, which can be a useful metric, but you should no longer call it a price per barrel as what you have effectively done is replacing barrels with a different unit of oil (that varies in time depending on oil intensity) in the calculation. The result that making that adjustment stabilizes the prices (discounting the peak in the 80s) is not surprising to me. As oil prices rise, the economy adapts to use less oil, so the adjusted metric tends to an equilibrium. Isn't that what supply and demand is supposed to do?
- runholm 11y agoAh, yes. Someone managed to find words for my thoughts. I was left with the same impression that the author had adjusted for multiple factors, to the point that the result was not presenting the same data as he started with. Good that someone could spell it out :)
- IkmoIkmo 11y agoI thought I'd read an article about new studies that put a value on the various externalities of oil using industries (e.g. pollution, congestion, motor accidents, climate change etc). Instead I got an article that pretends to show some 'actual' price of oil by mixing scales on one axis and presenting a dollar-denominated oil intensity as a 'price of oil' which is just misleading and not terribly interesting because for one it's nothing new and moreover it ignores a whole bunch of factors like outsourcing production to other countries (moving your consumption off the country's books doesn't magically mean it doesn't exist).
- 13thLetter 11y agoIt's not the articles's fault that it wasn't about a topic that interests you.
- diminish 11y agoPricing of oil is directly managed by an oligopoly of players (govs, large corporations etc) on the supply side, and a diverse group of buyers with few main clusters on the demand side. Stats, inflation, intensity can be misleading to deduce "what oil should become". A game theoretic approach seems to be better, where main players are observed based on their moves and the outcomes with probabilities.
- AtomicOrbital 11y agoPrice of oil must factor in cost of military presence in Middle East which should be incurred directly by oil companies, not tax payers. Once such adjusted, green energy renewables suddenly become cost effective