Oil Prices: The decades of cheap prices are over

"Don't put all your eggs into one basket!"

In the early 1940s, with the world at war, oil prices likely fluctuated, but I can find no record of price per barrel (ppb). The earliest posted crude prices at Illinois Basin are from March 31, 1946 and ppb was $1.37.

$1.37. You and I can’t get a decent cup of coffee today for that price. But 65 years ago one could buy a barrel of oil and have enough change left over from a two-spot to get a haircut, grab a burger, watch a movie, and take a bus ride home.

According to Illinois Basin, it wasn’t until Dec. 1973 that average monthly oil ppb past the $5 mark. However, to some manufacturers, dependent upon cheap oil prices to turn a decent profit, the overall average in the decade of the ‘70s - in the $6.50 - $6.99 range - must have seemed ungodly.

Things got a lot worse in the 1980s.

“Events in Iran and Iraq led to another round of crude oil price increases in 1979 and 1980.  The Iranian revolution resulted in the loss of 2 to 2.5 million barrels of oil (mbpd) per day between November of 1978 and June of 1979.  In 1980 Iraq's crude oil production fell 2.7 mbpd and Iran's production by 600,000 barrels per day during the Iran/Iraq War.  The combination of these two events resulted in crude oil prices more than doubling from $14 in 1978 to $35 per barrel in 1981.” (HISTORY OF ILLINOIS BASIN POSTED CRUDE OIL PRICES)

Thank goodness oil prices settled down later in the 1980s, thereby bringing the 1980s average ppb down around $21 - $22.

Though various factors have affected the price of oil from the 1980s to today, the trend has, for the most part, been upward.

E.g., 1990s - $15.70 ave. ppb. (a relatively cheap decade)

2000s - $46.00 ave. ppb. (2008 saw unusually high prices, with 5 months posting averages above $100 pb)

The current decade is on course to beat all records of the past. The 2010 average ppb was $71.21, up 35% from 2000s average. And the 2011 average ppb (for the first 9 months) was $87.48, up 47% from 2000s average.

Today you can buy a barrel of oil for $106.10, and though our wages have increased substantially since the $1.37 ppb in the 1940s, only the rich can afford the increases to the cost of living we are seeing today and will see in the future as oil prices continue to rise.

Though all nations should have been promoting conservation of resources and preparing plans to transition away from an oil-based lifestyle in the 1970s, most promoted larger lifestyles instead. Even today, Canada’s Prime Minister chief goal is to keep the oil-based fires burning under our economy by selling as much tarsands oil as possible to Asia and other countries.

With the decades of cheap oil prices over, and with prices now doubling and tripling before our eyes, conservation efforts related to fuel must double and triple as well. Public education related to the need for smaller houses and cars, reduced spending, paying down debt and saving for tougher times ahead must come ahead of selling more oil at all costs.

To those who think, at $106 per barrel, Canada will make a fortune, I say, some will make a fortune, but most will not.

Most will wonder what tomorrow will bring other than higher oil prices and a lower standard of living.

[Cartoon by G. Harrison]

***

Please click here for more about oil prices.

.