Real price of oil.
Thought people would find this of interest. This is not updated from September being the last observation.
In 1999 when this bottomed West Texas Intermediate was under $12/bbl
and gasoline was under $1/ gal.
Relevant and even prescient commentary on news, politics and the economy.
I think the second chart is more interesting showing how the peak energy spending was in the early 1980s after the second oil shock. Also interesting that the share of spending on energy is now below that of the 1960s. (Even with the .22 cent gas of the time, I recall paying .22 per gallon in Ca in 1972 before the first shock)
With energy’s share of spending already so low, I worry that everyone may be too optimistic about the stimulative impact of lower oil prices.
We will get a bounce, but how big will it be?
Gas certainly feels a lot cheaper than it has anytime since about ’99 for me. Might be an inertial impact on my reckoning though, since the decline has been so precipitous.
We really should see the impact coming back in lower prices or higher retail margins on all sorts of stuff, and it ought to be considerable. Might even be enough to offset six months of labor price increases in China. We’re seeing something like 14% annual wage inflation there right now…pretty much makes it unsustainable for businesses to stay there.
FORBES (from 2011): ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel
“Rex Tillerson, the boss of ExxonMobil admitted last week that the price of oil–based purely on supply and demand- should be in the $60 to $70 a barrel range. The reason it’s above $100 a barrel, Tillerson explained, is due to the oil majors using futures contracts to lock in current high prices, and speculation that is engineered by the high-frequency trading of quantitative hedge funds.”
http://www.forbes.com/sites/robertlenzner/2011/05/14/exxon-mobil-ceo-says-oil-price-should-be-60-70-a-barrel/
re: We will get a bounce, but how big will it be?
November’s seasonally adjusted spending at gas stations (which includes more than gas) fell 0.8%, from $43,921 million to to $43,578 million…total retail sales rose from $446,066 millin to $449,282 million, about ten times as much as gas station sales fell….
if you figure gas stations as all gas, it’s less than 10% of retail sales, and retail is about 1/3 of PCE…so every 10% of gas savings could translate into a ~0.3% bounce in PCE, assuming that it’s all spent…
on energy as a percentage of PCE, do you have a breakout of what percentage of that is gasoline, diesel, heating oil, piped gas and electricity?
over the last 5 years, we’ve had quite a decoupling…as oil prices, and hence gasoline and diesel, were rising, natural gas prices were falling from around $12 mmBTU to below $3 mmBTU….it was only last winter’s polar vortexes that pulled the gas driller’s bacon out of the fire, causing a spike up to above $5 mmBTU…
Spencer England: Don’t forget that graph of expenditure percentage is an average. For the increasing number of folks at the low end of the income distribution, gasoline is a fairly large expense, and every penny saved on it will be spent on something else.
The data on PCE is from the BEA and they do not break it down any more than this.