Crude Oil is Unchanged since 1985

Adjusted for inflation as measured by CPIAUCSL , the price of crude oil hasn't changed since the price peak in 1985.

The back and forth oscillations in supply and demand over the decades has left us right where we started back when I was in college 38 years ago!

The price of a first class stamp in 1985 was 13 cents and is now 66 cents. So, the price of a stamp is up 5-fold but the nominal price of crude oil was $31/barrel back in 1985 and is just over $90 now for a 3-fold increase.

So when you hear over and over in the general media that "crude oil is up" and devastating the economy, you can rest assured that "we have been here before". Yes, prices aren't as low as they were when we had Covid-Crash prices of $25/barrel but at least we don't have $140+ that we had back in 2008 prior to the deleveraging crash called the GFC.

Comment:

Thinking back to my slightly higher than minimum wage job back in 1981 when min-wage was $3.50, it is now $10-$15 depending on where you live, which is 3x-4x back at that time. I could buy a gallon of gas for around $1.30 but it would only take me 8-12 miles in my family station wagon. Today, cars get much better gas mileage closer to 25 mpg or more. Which means that an hour of work today at minimum wage will take you 2-3 times FURTHER now than back in 1985 because inflation in crude oil prices isn't as high as inflation in minimum wages AND gasoline engines are more fuel efficient. So, again, 1 hour of work in 1985 meant I could buy nearly 3 gallons to drive 24-36 miles. Today, 1 hour of minimum wage work will allow me to drive 75-100 miles in an average car (at $3.3-$4 gasoline).
Times are better now.

Comment:

I added the Money Supply (M2) adjusted for population since 1985 in the USA.

The factor is 6X over that time span. We have increased the money supply by a factor of 6 since 1985, per person. More money chasing the goods and services tends to push up those goods and services prices.

This goes along with the idea that the general price level of 3x is slightly under (100% under) this other measure of price level.

Saturday, October 7, 2023, 5:44PM EST