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150 Years Of "Real" Oil Prices

Tyler Durden's picture




 

In real terms, the price of crude oil has not been more expensive since the Pennsylvania Boom over 150 years ago...

 

 

Source: BP

 

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Mon, 07/14/2014 - 20:34 | 4957534 malek
malek's picture

Umm sure, using the totally unrigged CPI deflator I assume...

Mon, 07/14/2014 - 20:49 | 4957574 CrazyCooter
CrazyCooter's picture

This is the natural order of things being as all the cheap, easy stuff is gone. Without that huge price movement, new supplies would not come online.

Robert Rapier got into this some recently:

http://www.energytrendsinsider.com/2014/07/10/world-sets-new-oil-product...

I like the fact that he points out fracking is what kept global production from becoming too tight and crushing the economy.

As an aside, the depletion rate on fracked wells, technology from the 80s which was never economic until recently (hmmm), is very steep and measured in months, not years. These wells have to be continously redrilled/refracked to keep up production which is often tens or hundreds of barrels a day (not thousands or tens of thousands like conventional wells). Fracking is a malinvestment made possible by free money and zero interest and it will go tits up the moment real rates return to the market.

Regards,

Cooter

Mon, 07/14/2014 - 21:59 | 4957719 0z
0z's picture

15 Silver Dollars, Today, would be about 300 USD. So we're not even halfway to the prices of the first boom.
Edit: My bad, the chart doesnt show those prices. But oil went over 15 Silver dollars per barrel back then.

Mon, 07/14/2014 - 22:26 | 4957794 teslaberry
teslaberry's picture

i think yo uare deeply underestimating how much cheap labor there is out there to frack natural gas. 

 

the return on energy invested will not skyrocket just because zirp might go away. 

you can burn natural gas to create the energy to get more of it out of the ground, there is  A WHOLE WORLD FULL OF FRACKABLE EARTH, SOME MORE PROFITEABLE SOME LESS. 

 

THE SAME WAY METHANE HYDRATES ARE ALL OVER THE WORLD , THERE IS TIGHT GAS PRETTY MUCH IN MANY MNAY MANY PLACES, THE ONLY QUESTION IS WHERE IS SAFE AND PROFITEABLE. 

 

Just because things might be devastating to the environment doesn't mean we cannot do them for a long long time. 

the bottom like is the energy released from combusting CH4 IS SUBSTANTIAL AS A FUEL COMPARED TO BURNING COAL LET ALONE WOOD. AND IF WE HAVE TO GO BACK TO BURNING A HELL OF A LOT OF COAL OR EVEN WOOD----WE WOULD.  PUN INTENDED.

Mon, 07/14/2014 - 23:07 | 4957895 swmnguy
swmnguy's picture

Financial considerations can change, or be changed.  It's our system, and it's become very much abstract.  What can't be changed the way we want it is the EROEI.  Once it takes more energy to get it out of the ground than you get, it's over.

Mon, 07/14/2014 - 23:30 | 4957960 samsara
samsara's picture

If folks only understood that....

(That and Geometric progressions...)

Mon, 07/14/2014 - 23:28 | 4957953 samsara
samsara's picture

You're not actually bringing up Methane Hydrates are you?

Tue, 07/15/2014 - 00:51 | 4958060 boattrash
boattrash's picture

teslaberry, Looks like your shIFT KEY iS GETTIng A bIT STICKY.

Tue, 07/15/2014 - 01:46 | 4958140 Likedeeler
Likedeeler's picture

The main question is:
How cheap are alternatives to fossil fuels?

A kilowatt hour of photovoltaics should be no more than 15 cents which makes the total energy of a barrel oil approximately 1.600 kWh x 0,15$ = 240 USD
This is the theoretical absolute upper limit of all possible oilprice that is used for energy purpose.

In reality the mobile use of oil in transportation means efficiency losses of >70% in the engine.
That gives you a comparable price of 0,3 x 240 USD for the effectively used barrel at best. I do not perceive mineral oil prices above 70 USD as sustainable.

Tue, 07/15/2014 - 00:48 | 4958081 boattrash
boattrash's picture

Yeah Cooter, in the old days, you could set up a wooden derrick, twist a bit to the depth of a water well today and have all you could stand.

Now I take a $30,000 dollar a day boat 180 miles offshore, to supply a $1million+ a day drilling rig. If all of that works out well, they lay a multi million dollar wellhead and pipeline (subsea) to get said oil to a $3Billion production platform, into another pipeline to get it to shore and it still is NOT refined yet.

Tue, 07/15/2014 - 09:16 | 4958642 wrs1
wrs1's picture

The old wells didn't produce that much, that is a myth.  Some did but they were the minority and the earliest in the field. With tight oil, all wells will have consistent IP and production curves and be dependent on the frac.  The field won't play out due to a few big gushers depleting the pool, tha isn't the way it works.

Tue, 07/15/2014 - 09:12 | 4958632 wrs1
wrs1's picture

The depletion rate on fracked wells is faster but the IP rates are much higher than on conventional wells.  The conventional wells were typically IP in the 100s of barrels per month or maybe a few thousand and they were cheap to drill so lot's were drilled.  Not all conventional wells spewed out oil as in the Beverly Hillbilly show.  Most of them were solid producers of several thousand or even less than a thousand per month.  Stripper wells just go on and on producing less than 5 barrels per day and some will produce until the casing fails but they never produced more than 1000 barrels per month to begin with.  Their production costs were also commensurately low.

Tight oil production IPs are in the hundreds or even thousands of barrels per day which is more than sufficient at today's prices to get payback in less than a year.  A good well can produce 20,000 barrels a month for the first three or four months which is $6-8m and then it will still continue to produce 5-10.000 barrels per month for at least a year.  Total production from an average tight oil well would be >100,000 barrels in the first year which amounts to $12m in gross revenues.  Some wells can cost more than that to drill but many only cost $5-7m.  It is the frac that really determines the production and not the geology.  Much of this tight oil is apparently evenly distributed in the formation and if a frac opens it up enough, production rates can be as high as 50,000 barrels of oil per month in the first several months.  That kind of well is where the good money is being made.

Maybe if you want to better understand how tight oil is being developed you should read some of the industry literature.  Here is a good article on tight oil in the Permian.

http://www.ogfj.com/articles/print/volume-11/issue-5/features/permian-be...

In terms of well performance, the highest 24-hour production rates from horizontal wells have been reported in the Midland Basin by Pioneer Natural Resources with rates above 3,000 boe/d (>900 bbl/d of oil). In 2013, dedicated Permian Basin companies such as Pioneer, Energen and Laredo reported 24-hour production rates above average for horizontal wells drilled in the Texas part of the Permian Basin

 

Tue, 07/15/2014 - 10:22 | 4958856 boattrash
boattrash's picture

wrs1, thanks for the posts/Tech. Info.My comment was not technical, just more of a rant to point out that the oil isn't really cheaply/easily obtained.

While I'm not an "Oil Licker" I do have a lot of respect for the cost and lobar involved in extracting it. These high volume offshore wells also must be fracked, hence the Frack Boats for this specialty work.

Also don't forget R&D costs. About a decade ago, we had 2 boats hauling supplies/Synthetic Mud (4,000Bbl per trip,@$535 per Bbl, about twice per wk for months) to Ocean America, which was drilling to (at that time) a record depth of something like 24,000-26,000 ft. We did this for Aprox a year. It takes a lot to get a good ROI on that type of well, and while nobody said so, I feel it safe to assume that you have to write some of that off as "Learning Curve".

Fast-Forward to my off time, I can stop to gas-up my car and listen to people at the pumps bitching about $3.50-$4.00 gas, then watch them walk into the store without batting an eye, and pay $1.00-$1.50 for a pint of water. ($8-$12 per gal)

Lastly, I would say Americans should be thankful that this industry is Non-Union, otherwise gas might be $7-$8 per gal.

Tue, 07/15/2014 - 11:08 | 4959065 Chief Kessler
Chief Kessler's picture

The US is currently drilling about 1000 wells per year. For the last 20 years. How many of these are producing 100,000 bbl/day ? Few. The junkie is so full of tracks and holes, soon it needs another host. Hello Bandar? I think I left my watch at your place, can I come by and pick it up? What do you mean no? You lying bastard, I'm coming over there right now,click.Boom.

Tue, 07/15/2014 - 13:30 | 4959660 wrs1
wrs1's picture

None produce 100,000 bbl/day, that is pretty decent annual production.  It's not as bad as people think.  I think the bigger issue going forward for the frac technology will be water.

Mon, 07/14/2014 - 22:39 | 4957824 tempo
tempo's picture

1 thing remains unchanged, oil will remained the most valuable asset in the world. w/o oil nothing else can be produced or will have value. According to BP, we have 50 years of supply. Long before that oil goes to $1000 per bbl and our standard of living will be over. Enjoy the next five-ten years,

Mon, 07/14/2014 - 20:36 | 4957536 Battle Beagle
Battle Beagle's picture

Better Chart: (For Those of Us Who Prefer To Measure Prices With "Real" Money)

Gold to Oil Ratio Historical Chart

http://www.macrotrends.net/1380/gold-to-oil-ratio-historical-chart

Mon, 07/14/2014 - 20:52 | 4957585 Spastica Rex
Spastica Rex's picture

Do you also happen to have a link to the oil to gold ratio historical chart?

Mon, 07/14/2014 - 20:55 | 4957597 Battle Beagle
Battle Beagle's picture

Best I can do using google: 

The Historic Gold-Oil Ratio Forecasts A Much Higher Price For Gold

Filed in Energy, Precious Metals by SRSrocco on January 2, 2014

http://srsroccoreport.com/the-gold-oil-ratio-forecasts-a-much-higher-pri...

 

Mon, 07/14/2014 - 23:18 | 4957909 Flakmeister
Flakmeister's picture

He and I debated the merits of his chart, here is my metric

http://pricedingold.com/charts/Crude-1950.pdf

It doesn't capture the recent WTI-Brent spread though (small effect).....

Tue, 07/15/2014 - 11:37 | 4958484 Ghordius
Ghordius's picture

remarkable metric

Mon, 07/14/2014 - 21:01 | 4957617 Argos
Argos's picture

That is a very noisey chart.

Mon, 07/14/2014 - 20:36 | 4957537 Caviar Emptor
Caviar Emptor's picture

It doesn't get more real than oil prices in real terms.

Mon, 07/14/2014 - 20:35 | 4957538 Hunter S. Thompson
Hunter S. Thompson's picture

See that beuatiful dip after 2008. The USA would be rocking if the fed did not jump in. America runs on cheap energy and labor.

Mon, 07/14/2014 - 20:56 | 4957601 CrazyCooter
CrazyCooter's picture

You got double down votes!

All the trolls are going to copy you now ...

Regards,

Cooter

Mon, 07/14/2014 - 20:35 | 4957539 Hunter S. Thompson
Hunter S. Thompson's picture

See that beuatiful dip after 2008. The USA would be rocking if the fed did not jump in. America runs on cheap energy and labor.

Mon, 07/14/2014 - 20:56 | 4957600 CrazyCooter
CrazyCooter's picture

You got double down votes!

All the trolls are going to copy you now ...

Regards,

Cooter

Mon, 07/14/2014 - 20:40 | 4957558 Tasty Sandwich
Tasty Sandwich's picture

'Prophets of Doom' Discuss Impacts of Peak Oil and Debt

Every American right now has 200 to 300 energy slaves standing behind them doing work that we take for granted: the energy in the taxi that got me here today, the lights in this building, our food system. The average food travels 1,500 miles to get to our plate. And that all uses energy.

All these things are subsidized by a one-time endowment of fossil energy that is so powerful that, for all human intents and purposes, it is indistinguishable from magic.

Prophets of Doom

 

Mon, 07/14/2014 - 21:24 | 4957659 dwayne elizando
dwayne elizando's picture

Oil, it's what's for dinner.

Mon, 07/14/2014 - 23:22 | 4957923 samsara
samsara's picture

Here's the part that doesn't even gets mentioned.

This will give you an idea.

"You Don't Get long carbon chain molecules from a wind turbine"

Plastics. One example, every hospital would stop working, Nearly every item you see is plastic. It used to be glass and cloth. Now every thing is a one use item. No huge equipment washing departments, Sheets & other cloth items had to be washed. No longer exists.

Pre- 1900, Pre-oil, 99% of everything you saw was made out of Metal, Wood, or Glass.

Today what percentage of those items still made out of those same material?

Imagine if they had to be. (Don't worry we physically wouldn't have the materials to make those items today.)

Plastics, Pesticides, fertilizers, +++

Long carbon molecules only have one source* - Fossil fuels.
Not PV, Wind, Hydro, Nuclear,...

* With a scale of a 7 billion person world/need.

Tue, 07/15/2014 - 02:23 | 4958162 Matt
Matt's picture

GTL using natural gas to make hydrocarbons of specific length can work, they have some for paraffins, etc. Purer, without the sulfer and other contaminents found in oil.

There is also promising work in algae for making plastics, etc.

Of course, both of these options would come at a much higher price.

Hemp plastic is another possibility, or from other oils like coconut, soybean, etc.

Tue, 07/15/2014 - 08:01 | 4958457 de3de8
de3de8's picture

Until it's self sustaining, it's not.

Tue, 07/15/2014 - 09:16 | 4958643 samsara
samsara's picture

* With a scale of a 7 billion person world/need.

And Nat. Gas is a fossil Fuel

Tue, 07/15/2014 - 11:37 | 4959238 Matt
Matt's picture

No, it doesn't take millions of years to make methane. You can harvest it from cow manure, rotting vegatation, sewage.

Sure, the supply would be much lower, and the price of plastics much higher, but hospitals are not suddenly going to suddenly run out of supplies.

Mon, 07/14/2014 - 20:40 | 4957559 Spungo
Spungo's picture

"Gold to Oil Ratio Historical Chart"
That chart makes a lot of sense. During the biggest war in human history, oil was ridiculously expensive relative to gold, as it should be.

Mon, 07/14/2014 - 20:46 | 4957573 disabledvet
disabledvet's picture

We'll see what the pricing of Tesla's Model X is next January. (KNDI had a huge day today. That's an all electric vehicle for probably 5 grand usd)

If that SUV comes priced at 35 grand that's the end of pricing power for oil inside the USA. Gasoline will cost a dime a gallon and your home heating bill (to the extent you even have one) will drop by 90%.

Solar City (as with Tesla and KNDI...another big winner today) uses the used battery of the Tesla to store the power of the solar cell on your house (or front yard if you like.) That should obviate the need for peaking plants (natural gas) for electricity for the entirety of the USA save for the Northeast and Upper Midwest...and even that might be in doubt because of all the hydro power.

Contrary to what the inflation folks say "when natural gas hit two bucks a bcf" (18 months ago) that was an all time record low in price and turned a lot of billionaires into millionaires. All it would take this time is ten lithium-ion batteries "in sequence."

Mon, 07/14/2014 - 20:54 | 4957593 Spastica Rex
Spastica Rex's picture

BALLS!

Mon, 07/14/2014 - 21:01 | 4957618 CrazyCooter
CrazyCooter's picture

Pencil out the math on the raw materials necessary to produce the batteries. If EVs are genuninely adopted, lets say, 30% of all cars on the road, how many batteries is that? Batteries last how long?

Once you have a SWAG, convert to tonnage and post your assumptions.

Assume 5 years replacement cycle and a car that is kept ten years would fully consume two new batteries over its life.

Adjust those numbers.

One quickly realizes that most of these batteries use very expesive non-replacable materials (e.g. rare earth elements) and that mass production for something like CARS instead of PHONES may prove to be a bit of a bottleneck.

Real adoption of EVs will REQUIRE 100% recycling and lots of factory space, chemical processing, etc to make it happen.

Sounds green, aye?

Regards,

Cooter

Tue, 07/15/2014 - 03:06 | 4958187 Matt
Matt's picture

Aluminum batteries. Just have to take it back to Alcoa to resmelter once it is all turned into Aluminum Oxide. Won't be home rechargeable, but 3000 miles is pretty good for a fill.

Mon, 07/14/2014 - 21:13 | 4957637 The Most Intere...
The Most Interesting Frog in the World's picture

Not questioning the long term validity of solar or electric cars, but Solar City, as an example, is profiting from taxpayers.  SC takes advantage of corporate/business tax credits that are not available to individuals.

Under the SC model, SC pays to have the solar panels installed (on your home) and owns them.  They get the tax credits and limit your benefits to some percentage.  Excess power you don't use, is then used by SC to profit in other ways.

SC is, in essence, placing a mini utility on your property without having to pay for the land.  And, they get tax credits to boot.  This model would most likely not be possible without the credits and would be much less desired if the homeowner were availed the same credit.

Elon Musk is not for Solar power, he is only for corporate provided solar power.  It's different ;)

 

Mon, 07/14/2014 - 22:41 | 4957828 tempo
tempo's picture

It takes lots of oil/gas/coal to produce clean energy.

Mon, 07/14/2014 - 20:52 | 4957588 astroloungers
astroloungers's picture

It is good to know history but.....knowing the adjusted price from 20 years ago has NOTHING to do with the price I will pay to fill my tank tomorrow.

Mon, 07/14/2014 - 20:56 | 4957599 jpc578
jpc578's picture

Of all the world events listed in that chart, the one world event not mentioned was Nixon's closing of the gold window in 1971. There were oil shocks both before and after that date, but the volitility in oil prices (in both nominal and real terms) since that date have been significantly higher.

Also, after downloading BP's excel data I divided oil prices by GDP per capita. In 2013 a year's worth of inome will buy you about 500 barrells of oil. For comparison purposes a years worth of income would have purchased in:

1875: 134 barrels

1900: 229 barrels

1925: 469 barrels

1950: 1,157 barrels

1970: 2,914 barrels (all time high)

1980: 341 barrels

1990: 1,007 barrels

1998: 2,588 barrels (most recent high)

2011: 445 barrels (most recent low)

Mon, 07/14/2014 - 21:17 | 4957635 CrashisOptimistic
CrashisOptimistic's picture

 

Oil used to come out the ground as a result of a 30 foot high wooden structure that was nailed together in a couple of days, a pipeline attached and presto, 8,000 barrels/day.

Now you have to build a 30 STORY tall structure, float it down a river to the Gulf, put a 5,000 horsepower marine engine on it, man it with a crew flown back and forth with a helicopter and that platform also gets 8,000 bpd.

You don't need to measure "cheap" in anything other than joules. 

Mon, 07/14/2014 - 21:29 | 4957669 Big Ben
Big Ben's picture

In 1964, a gallon of gas cost $0.30. The current melt value of a 1964 silver dime is $1.51. So gasoline has gotten a bit cheaper over the past 50 years if you measure it in silver.

Mon, 07/14/2014 - 22:12 | 4957750 pitterrier
pitterrier's picture

So today it's $4.53/gallon in 1965 silver dimes (3 dimes or 90 cents in 1965 silver).  That's not cheaper. 

Mon, 07/14/2014 - 22:42 | 4957830 Evil Bugeyes
Evil Bugeyes's picture

Are you a troll, or just an idiot?

Mon, 07/14/2014 - 22:57 | 4957868 NoPension
NoPension's picture

EvilB,And I wasted time to explain. I hit save, read your post, and laughed my ass off!

Mon, 07/14/2014 - 22:52 | 4957859 NoPension
NoPension's picture

Pitterrier.
Say I could buy a gallon of gas, in 1963, for 25 cents. Sounds about right. I take a quarter out my pocket, and give it to the clerk. 25 cents= gallon of gas.

Today, that 1963 quarter (90% silver) has a melt value of about $4.50.
In MOST parts of the country ( for you mopes who live in Cali and ,like clockwork, not here,not here,waa, waa)..... You can still get a gallon of regular for about $3.50-3.75

The point being, using real money ( there had to be a catch) the dollar price of gas has remained stable or even gotten cheaper. In dollars.

Now, if you want to talk about value, we're on to something........

Mon, 07/14/2014 - 23:18 | 4957934 Flakmeister
Flakmeister's picture

You guys always forget that silver to gold ratio was fixed by fiat at ~40 to 1... You have to work with gold dollar ratio....

You should then also realize the the American consumer was taking it up the ass on the crack spread (42 x 0.25 = $11.25 vs $3.25 a barrel....

Mon, 07/14/2014 - 23:27 | 4957951 Honey Badger
Honey Badger's picture

Finite resource, infinite fiat.

Mon, 07/14/2014 - 23:40 | 4957981 Magooo
Magooo's picture

HIGH PRICED OIL DESTROYS GROWTH

According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.  http://www.iea.org/textbase/npsum/high_oil04sum.pdf

 

 

THE PERFECT STORM (see p. 59 onwards)

The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel. http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf 

Tue, 07/15/2014 - 03:07 | 4958189 SemperFudge
SemperFudge's picture

The fact is, conventional oil production has been in decline since sometime around 2003-2007. Unconventional production (deepwater drilling, tar sands, fracking, etc.) has only moderately grown total production levels in the years since then, but rising demand throughout the world is going to keep driving prices upward.

I remember when people were saying back during 2000-2003 that there was no way prices could reach $100 by the end of the decade... well, here we are... Get ready for $200 per barrel by around 2022. By then, civil society will probably be collapsing in many more places throughout the world than it already is right now.

Tue, 07/15/2014 - 03:23 | 4958209 Magooo
Magooo's picture

The most important graph in the history of mankind https://gailtheactuary.files.wordpress.com/2014/07/us-crude-oil-producti...

 

Drill Baby Drill.  That is all that is between us --- and utter and total and endless collapse

Tue, 07/15/2014 - 03:45 | 4958233 Magooo
Magooo's picture

I take that back - the most important one will be the one that shows shale oil has peaked - expected within the next two years or so.

Tue, 07/15/2014 - 06:43 | 4958374 esum
esum's picture

when will we have peak ALGAE OIL..... SOME SAY OIL IS PRODUCED BY A NATURAL PROCESS IN THE GROUND NOT INVOLVING DINOSAURS.... how many fuking dinos were there... come on, new tech appears at the right moment to save the day.... and will again..... when xom feels like it... meantime filler up with the $4 soon to be $5 regular.... fact is the world is awash in oil... and STUPID POLITICIANS..... 

Tue, 07/15/2014 - 08:17 | 4958478 Flakmeister
Flakmeister's picture

I hear they are looking for a village idiot over in the Yahoo! boards....

Do NOT follow this link or you will be banned from the site!