Oil Consumption and GDP 1970 - 2006

OK, the numbers are in. There is nothing new here - and no surprises. This a chart I had done before, but too quickly with rough numbers. I took the opportunity of a reader's suggestions to revisit the work and analysis.

First, I still want to work on the graph design, since the Green Line is redundant, and many of the labels are blurred or unclear. But let's talk about that. This graph covers alot of years. 36. A third of a century. I always like to get the long view on stuff, but it is very difficult feeling confident about the seamlessness and reliablity of your data over so long a period. Remember, I use the Nymex price for oil, and they only started trading in 1983. So where did I get the data before that? You will have to trust me for now. I can't decipher my own notes on the numbers. I use an acronym - IRAC - which I can't for the life of me remember what I meant by it. The good news is that the numbers match all other published oil-price data for the time period, I'll be posting a graph soon demonstarting that.

There is a simple formula behind these numbers. (Nominal Price per barrel x number of barrels per day) / Nominal GDP for quarter. I have calculated this on a monthly basis by using the quarterly GDP number for each of the months in the quarter.

I manipulate these numbers to get as smooth and as descriptive an image as possible. I'm using 13-month centered moving averages on barrels-per-day and GDP. I'm using a trailing 6-month average on the price. My method is simple. I looked at several variations - and this looks better. Certain people will have a problem with that, and they may be right, for certain reasons. Me, I'm looking for bigger, long-term trends. I'm looking for lessons and conclusions. I'm looking for that in images.

The Green Line is the inflation-adjusted price of oil, using, what I believe is a CPI-based inflation adjuster. I threw it in for the very reason that I knew I had produced the data probably two years earlier and that the derivation method was most certainly different. Remember, the variables used for the Blue Line(percentage of GDP) are all nominal, non-inflation-adjusted. The fact that the two lines nicely mirror each other serves to somewhat verify that you must be doing something right. Keep in mind, these are two different sets of data plotted against two different axes.

I've already written too much. More soon...

Oil vs. GDP 1970-1982

This is just a preliminary graph showing United States total petroleum products used cost figured as percentage of GDP. Dollar values used are original nominal values. I should have next 25 years tomorrow.

How High is the Price of Gasoline?

Is the price of gasoline really that high?

The average retail price of gasoline in the United States is currently about $2.95.

Over the last two and a half months, we have seen gasoline demand exactly flat versus the same period last year. While given weeks and months often show flat or even negative demand growth, flat demand over a 10 week period is rare. Is this real demand destruction? Is the high price of energy finally cutting into Americans' discretionary spending?

Just this week we saw the release of inflation numbers which had quite a significant effect on the stock market. Monday morning all the talk was of Dow 13,000 on CNBC. By Wednesday evening the majority voted for "beginning of the end" in a poll conducted by Larry Kudlow.

A year ago, I was of the opinion that we would not change our behavior until gasoline reached $3.50. I still think that is largely true. However, what if it takes another year or two to get to $3.50? Will we be so acclimated to the price by then, that it will take $5 gasoline to make an impression. I think it is all about the timeframe - how fast the price rises, more than the price itself.

For gasoline to be $3.50, oil needs to be about $110. $5 requires at least $160 oil. We still have a long way to go. The fact is that if we start in 1996, gasoline has only increased, in inflation adjusted terms, by 7% per year. The huge run-up since early 2004 masks a relatively low, stable price for all of the previous two decades.

As far as inflation goes, if a 50% increase in the price of gasoline in the last two years has contributed a few percentage points to an overall rise in the cost of living, then for it to continue to have that effect, gasoline has to continue to rise at the rate of a dollar per year. I don't think that will happen. No dollar rise, no inflation.

I remain unconvinced by anecdotal horror stories of gasoline-use aired with increasing frequency everyday by the mainstream press. The EIA releases its weekly gasoline demand numbers every Wednesday at 1pm. I will continue to pay attention to these figures.

Support a robust gas tax now!
Oil CEO

Retail Gasoline vs. Crude Oil

Prices are inflation adjusted weekly averages.

Crude Oil Price 2004 - 2006

Global Oil Exports 1988 - 2003

I'll comment on methodology later when I update this and provide other views. I'm just testing this design here. Click on image to enlarge.

Updated Monthly Crude Oil Production 1995-2006

Worldwide production was down in February to 84.330 million barrels per day, from a revised 84.368 mbpd in January. This is a barely noticeable 38,000 barrels per day. Data from the EIA. The plateau continues.