Peak Oil is You
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Page added on September 25, 2015
In barrels of oil, America doing just fine
The good ship USA, as measured by the Barrel Standard, is doing nicely, thank you very much. You may not feel that way if you have any money invested in the stock market, but it’s true.
Apple shares have been knocked back to their level of about a year ago. So has the S&P 500. XLE, the energy sector exchange-traded fund, has been knocked back to its late 2010 value. Trillions in market value have been lost.
But plummeting stock prices notwithstanding, we’re doing rather well.
How can I say this? Easy. Just change the measure from dollars to barrels. This benchmark measures the value of America, or its stock market, in something many believe has more value than mere paper money. It measures the value of America by its industrial lifeblood — barrels of oil.
When the price of oil shrinks, as it has been doing, the value of America rises. So while the stock market has been sinking miserably when measured in dollars, it has been doing quite nicely in the stuff we all really need, barrels of oil.
Here’s an example. In 1970, well before the first OPEC oil embargo, the price of oil was $3.18 a barrel and the S&P 500 index was 92.15. If you had 1,000 barrels of oil, you could buy 34.51 units of the index.
Now fast-forward to 1975. That’s when the price of oil had more than doubled to $7.67 a barrel while the S&P index dropped to 90.19. So the same 1,000 barrels would buy 85.04 units of the S&P 500 index.
That was great for Saudi Arabia. Not so good for America.
Another level
Since then, we’ve had a lot of ups and downs. But even now, with the S&P 500 index down and oil recently at $40 a barrel, the same 1,000 barrels of oil would buy only about 20 units of the S&P 500. Our productive enterprises trade well against oil.
Now let’s take it to another level. Let’s measure the value of America — of the collective net worth of all American households — in barrels of oil.
In 1970, the net worth of all households, according to Federal Reserve figures, was $3.4 billion. So with oil at $3.18 a barrel, you could have bought the whole country for about 1.1 billion barrels.
Ten years of inflation and economic misery later, the situation was worse. By then, oil was $21.59 a barrel and the net worth of all households was $9.5 billion. So 438.6 billion barrels would have bought our country lock, stock and …
But now, Federal Reserve figures for the first quarter of this year indicate household net worth at $84.9 billion. With oil recently around $40 a barrel, it would take 2.1 billion barrels to buy our country.
When measured in oil, our country is worth two times what it was worth in 1970 and nearly five times what it was worth in 1980.
Measured another way, American households have a net worth that is about twice as large as the proven reserves of OPEC.
Better, not worse
The message here is that whatever buffets us from one moment to the next, we have reason to believe that things are getting better, not worse. The collective value of Western civilization continues to rise.
Better still, several worries are now much diminished. Here are two big ones:
Hubbert’s Peak, the notion that global oil production would inevitably peak and decline, has been dismissed. At worst, the peak has been deferred into a much more distant future. Better still, in a remarkably short time, our country has moved from serious energy dependence to an active debate about allowing exports of our surplus oil and gas.
The Middle East is still the largest pool of oil reserves in the world. But we in the United States, at least, are less dependent on it. That is a profoundly good thing. For all the worry about Iran, it is very likely that Islamic State militants will be more of a worry in the future. That concern could easily reach the oil fields of Saudi Arabia, Kuwait and Africa, as well as Iraq.
16 Comments on "In barrels of oil, America doing just fine"
makati1 on Fri, 25th Sep 2015 11:21 pm
Oh? Really? What about the ~5M bbls/day imports?
Top 5 in 2014:
Canada 37%
Saudi Arabia 13%
Mexico 9%
Venezuela 9%
Iraq 4%
Others 28%
http://www.eia.gov/tools/faqs/faq.cfm?id=727&t=6
Hmmm.
Canada tar sand is in trouble.
Saudis are moving East.
Mexico is having corruption problems.
Venezuela is on the ‘bad boys” list now.
Iraq is in chaos.
And the others are drops in the bucket with their own problems.
Not to mention the Us fraking disaster-in-waiting and lack of new finds.
The headline is more bullshit from the industry pimps.
Truth Has A Liberal Bias on Sat, 26th Sep 2015 1:25 am
Fuck are Americans ever retarded!
apneaman on Sat, 26th Sep 2015 2:59 am
“We” is one big happy family.
Pennsyguy on Sat, 26th Sep 2015 4:30 am
The number of barrels is less important than:
1. The no. of BTUs per bbl.
2. The no. of BTUs required to
extract and process each barrel.
Even being the Number One Indispensable Nation doesn’t change the laws of physics.
JuanP on Sat, 26th Sep 2015 8:25 am
What a load of crap! Skip this one, it is bad for your brain!
James Tipper on Sat, 26th Sep 2015 10:05 am
1) Truth has a Liberal Bias
2) Happy
3) Plant
The cancer of an otherwise decent message board!
John on Sat, 26th Sep 2015 10:23 am
I’d like to see the figure that estimates U.S. household net worth at $84.9 billion. That seems very low, by a factor of 10 at least. $1,000 per household?
makati1 on Sat, 26th Sep 2015 11:30 am
One chart of net worth by age.
< 25: $1,475
25 – 34: $8,525
35 – 44: $51,575
45 – 54: $98,350
55 – 64: $180,125
65+: $232,000
It's difficult to get a net worth for the 99% because the 1% skews the numbers upward by huge amounts.
"So says a new report, which estimates that the richest 1% will have as much wealth as the other 99% combined by next year."
http://edition.cnn.com/2015/01/19/world/wealth-inequality/
Numbers can say anything you want … with the proper spin.
John on Sat, 26th Sep 2015 12:07 pm
Thanks makati, my point is made. By your chart, we can certainly infer that the claim made in the article is off by factor of 10-50+. And since that appears to be the main point being made, the article has no credibility.
marmico on Sat, 26th Sep 2015 12:56 pm
Even being the Number One Indispensable Nation doesn’t change the laws of physics.
You neglected to add number 3 to your list. The number of BTUs needed to drive a vehicle a mile.
For all the fuctards out there in Green Acres-land.
Fifty years ago in 1965 it took Joe Sixpack 1.2 hours of work to drive 100 miles in a vehicle that fell apart after 50,000 miles, belched leaded gasoline without a catalytic converter on bias-ply tires and dreamed about the blue tooth while having twice the likelihood of death by accident.
In 2015 Jane Chardonnay works 0.5 hours to drive 100 miles.
apneaman on Sat, 26th Sep 2015 1:53 pm
And Jane has a new 20 year mortgage AKA student loan and a HR degree with a minor in gender studies and in only 5 more years she will be the head barista. Joe Sixpack, had his house paid off at 55 and sent 2 kids through college and had money left over for a retirement account and goodies.
GregT on Sat, 26th Sep 2015 2:09 pm
1) Truth has a Liberal Bias
2) Happy
3) Plant
You neglected to add number 4 to your list James. The biggest tumour of them all.
4) marmico
marmico on Sat, 26th Sep 2015 2:13 pm
Jane Chardonnay’s 2015 house is worth 50% more relative to her income than Joe Sixpack’s 1965 house. Substantially larger and more well-appointed digs.
http://www.calculatedriskblog.com/2015/09/feds-flow-of-funds-household-net-worth.html
A substantial portion of the rising student debt is atypical, older people (>25 years old) being scammed by for-profit-colleges.
GregT on Sat, 26th Sep 2015 2:20 pm
Jane Chardonay will never own a house in most first world cities. She is lucky if she can pay her rent at the end of the month, while working two jobs at minimum wage. jane is affectionately referred to as the ‘working poor’.
marmico on Sat, 26th Sep 2015 2:37 pm
Poor Greggie Green Acres T. Couldn’t afford to pay his property taxes in the Big City, so the taxman cometh mandating his refugee relocation to the Manure Country.
GregT on Sun, 27th Sep 2015 2:37 am
marmico,
We opted out of the insanity in the city, bought a very nice home on an acreage in the country, and pocketed more than you are likely to make in your entire miserable existence. Loser. 🙂