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Page added on January 2, 2018

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Ten Years Ago Oil Was Worth $100 More Than Today

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As the calendar changes, the price of West Texas Intermediate oil (WTI) is hovering around $60 per barrel. WTI is the U.S. benchmark oil and the underlying commodity used by the New York Mercantile Exchange in oil futures contracts. It is based on a type of light, sweet oil that was produced primarily in Texas in the first part of the 20th century. After WTI fell at the end of 2014 and ultimately hit prices below $30 less than two years ago, most oil traders and oil producers are thankful for what is seen as a rebound.

About a decade ago, though, WTI was trading at $145 per barrel (in July 2008). In inflation-adjusted dollars for November 2017, that $145 would be worth over $160. In other words, WTI is today valued at $100 less than it was valued nine and a half years ago.

At its peak in the summer of 2008, WTI was sitting at an unrealistic price. $145 could not last, and it did not. Less than a year later, amid the chaos of the global financial collapse at the end of 2008, WTI plummeted and briefly dipped below $40 per barrel. Then it quickly shot back up, eventually spending four years (from the end of 2010 to the end of 2014) in a comfortable range of $80 to $110. Then, of course, came the aforementioned price collapse that has been blamed on the fracking revolution, low demand, OPEC decisions and speculators.

In the summer of 2008, the price was high in part because many professionals believed the world was facing “peak oil,” a misguided theory that we had reached the peak of discoveries of new sources of oil. That summer, consumers became used to gasoline at $4.00 per gallon in some cities. Back then, a bet on WTI at $160 per barrel in 2018 would have seemed conservative . Today WTI is $100 below that.

Amidst all of the 2018 market predictions it is important to remember that 10 years ago few thought that oil prices would be this low today. The lesson here is that oil prices are fickle and despite the many predictions claiming to pinpoint the price of oil in a year or the average price throughout 2018, no one can forecast the future.

Forbes



8 Comments on "Ten Years Ago Oil Was Worth $100 More Than Today"

  1. Sissyfuss on Tue, 2nd Jan 2018 9:19 am 

    Party on, dudes. Forbes says peak oil is all in our minds and WTI is so cheap they’re giving it away. Nothing to see here, Trump’s got it all under control. Forbes cares.

  2. shortonoil on Tue, 2nd Jan 2018 9:19 am 

    In 1970 a barrel of WTI supplied 5.29 million BTU to the general economy. In 2018 it will supply 2.44 million BTU to that economy.

    Forbes just can not get their heads wrapped around the reality of depletion. They are still counting barrels, and pricing them from an inflation index that doesn’t take into consideration energy. These are our financial experts?

    http://www.thehillsgroup.org

  3. Antius on Tue, 2nd Jan 2018 10:54 am 

    Another uninformed writer looking at surface phenomena and not really understanding what is going on at a whole systems level.

  4. bobinget on Tue, 2nd Jan 2018 10:58 am 

    Just finished re-reading “Twilight in the Desert”
    (first published in 2005).
    Simmons was simply 12 years ahead of his time.

    Forbes, once again drinking it’s own ‘cool-aid’.

  5. rockman on Tue, 2nd Jan 2018 11:55 am 

    “In the summer of 2008, the price was high in part because many professionals believed the world was facing “peak oil,”…

    The price refineries pay for oil has nothing to do with what anyone believes about PO. First, refineries don’t buy oil in a time reference of years: the oil they buy today will be sold as products to consumers within months. Second, refineries compete with each other at the pricing level. And refineries base the price they pay for oil based on their projection of what consumers will pay for products made from oil.

    Refineries set the price of oil: not the producers or the futures trades. Producers either sell at the price refineries will pay or they don’t sell their oil. IOW they only control how much oil they sell at a given price and not the price itself. And you’ll never see a refinery post the details of its analysis: it is a very guarded trade secret in a very competitive market place. Future traders are betting on the price the refineries will pay in the future. And the majority of those bets (about 1 billion bbls)are made 30 days out. No one is betting on PO expectations changing in just 4 weeks.

  6. rockman on Wed, 3rd Jan 2018 10:23 am 

    “Ten Years Ago Oil Was Worth $100 More Than Today.” And 19 years ago oil was worth almost $50 less then today.

    One is free to interpret those stats as they wish.

  7. MASTERMIND on Wed, 3rd Jan 2018 10:44 am 

    Rockman

    Yes the 1960-1999 average price for a barrel of oil was 19 dollars a barrel (05 Inflation Adjusted). It’s more than triple that now.

  8. Dredd on Wed, 3rd Jan 2018 4:20 pm 

    “Worth” is not a word I associate with the most deadly of poisons (Oil-Qaeda: The Deadliest Parasite Of Civilization).

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