Adjusted for inflation as measured by FRED: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.
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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.
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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.
@Arm_27 Thanks! I have done other charts comparing oil to gold to look for times when oil is mispriced relative to other commodities.
rgorre
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May be you are right wrt crude. At the same time, you need to consider cost of living and people's income with inflation adjustment. Then, the cost of crude at 25 or 140 will make a difference in people's lives. Ultimately, it is how people are getting affected matters!
timwest
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@rgorre, The amount of money people have available to spend on energy is roughly flat over many years. There are times it has been cheap (like 2020-2021) and times when it is expensive. Overall, we are right in the middle of the range. We had a real bonus when oil prices crashed in the covid pandemic. Now that bonus is gone, so it does hurt. I get that. Long term though, it is a different story.
Journeyman124
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If you add in the 1000 percent increase or the 400 percent increase Pre-Opec 60’s and well into the 70’s these numbers add up to nothing more than fuzzy math. You can legitimately claim that Opec and failed US energy policies have cost US consumers billions if not trillions of dollars in inflation adjusted standard (not cost) of living increases. If these costs were on a standard deviation logarithmic graph we would all be living in a much lower standard of living economic environment. Because crude oil has a higher input ratio as it relates to the cost of goods sold. That ratio is even higher in Europe and underdeveloped economies. This is a selective analysis that leaves out the lower long term prices if those periods were included in your analysis.
timwest
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@Journeyman124 My analysis is a simple nominal vs real analysis. I think it is an interesting way to look at oil prices and even worthwhile to boil in down to “how many hours of minimum wage work gets you the ability to drive 100 miles”. The cost of processing crude oil into gasoline and transporting it across the country for consumption constantly changes and includes labor costs, insurance costs, trucking and pipeline costs and retailing costs. The price of everything is complex. The “general price level” should be factored into any analysis. The price of gasoline gets more complex too with states that tax its use. I live in Connecticut where we have a high tax. We could try dividing the price of oil by other price indexes