It's a Wednesday, and today's post definitely deals with numbers, but as for actual mathematics... not so much. The chart above gives the price of a barrel of crude oil from 1861 to 2006. It's easier to read if you click on the picture and enlarge it. The lower graph in black is the nominal price chart, the higher numbers are the prices adjusted for inflation and represented in 2006 dollars. For example, that highest peak in the late 1970s shows the price in 2006 dollars spiking to over $80 a barrel, but the price in the dollars of the day never reached $40 a barrel, at least not as an average price for a year.
I nicked the chart from Wikipedia, and I added the black line separating the 19th Century numbers from the more recent. Before the invention of the internal combustion engine, crude oil was just another heating oil option. On the Eastern Seaboard of the U.S., whale oil was the most commonly used heating oil in many places in the 1800's. I say this because the big spikes in the price we see, like the one right after the Civil War when crude oil was $100 a barrel when adjusted for inflation, would not have as severe an impact on the economy of the day, because the commodity wasn't as vital back then.
After the jumpiness of the prices in the 19th Century and in the early part of the 20th, by the mid 1920's, crude oil settles down and stays in a mild range of price fluctuations until 1974, in the range of $10 to $20 a barrel when adjusted for inflation. as we can see, there's a big spike from 1973 to 1974, where the price more than doubles from under $20 to over $40, goes down a little then spikes again in 1979, from the $40 range to the $80 range.
The price increases we have seen this decade are not like the two big yearly shocks of the 1970's. Instead, we are like a frog in the slowly boiling pot of water. The price keeps going up every year, sometimes a little, sometimes a lot, but never effectively doubling from one year to the next. I assume the measure of the price is the average for the year, so the dot for 2007 would move up again, as the average price climbed last year to about $72 a barrel. I don't know what they consider the rate of inflation for 2006, but the price increase was in the 14% to 16% range, so it has to be another tick up since government data denies that we have double digit inflation right now. This year so far, the average price is over $100 a barrel, and as I started writing this post, crude oil was selling for $117.49 a barrel.
My friend Jodi recently said she was starting to hear a word she hadn't heard since the 1970s: stagflation. We are currently in a period of slow growth to actual shrinkage of the economy, coupled with rising prices, most notably in the prices of energy and food. Whether you prefer laissez-faire economics or the Keynesian model, stagflation is the worst of both possible worlds, and high crude oil prices are a major contributing factor to this kind of economic distress. As I've said before, higher crude prices when the president and vice president are from the oil industry and the secretary of state has an oil tanker named after her... mere coincidence. Only the worst kind of conspiracy kook would even bring that up.
But look on the bright side! Not all prices are going up. If you own a home, it's probably worth less than it was last year.
Always a good idea to end a post like this on a happy note.
This blog is still alive, just in semi-hibernation.
When I want to write something longer than a tweet about something other than math or sci-fi, here is where I'll write it.