I see the point the author is trying to make, but in my view (disclaimer: not an economist) the presentation lacks rigor and can be misleading. If you adjust oil prices for the economic output that you get out of a barrel of oil, then you no longer have a price <i>per barrel</i>. You have the price of the oil needed to produce X dollars of GDP, which can be a useful metric, but you should no longer call it a price per barrel as what you have effectively done is replacing barrels with a different unit of oil (that varies in time depending on oil intensity) in the calculation.<p>The result that making that adjustment stabilizes the prices (discounting the peak in the 80s) is not surprising to me. As oil prices rise, the economy adapts to use less oil, so the adjusted metric tends to an equilibrium. Isn't that what supply and demand is supposed to do?
> This measure, usually called the oil intensity of the economy... ...is calculated by dividing the total national oil consumption by GDP expressed in constant monies.<p>So it's not taking into account the increased offshoring of our economy's oil and energy consumption, and the article chalks everything up to increases in efficiency (or switching to coal).<p><a href="http://ourfiniteworld.com/2011/11/15/is-it-really-possible-to-decouple-gdp-growth-from-energy-growth/" rel="nofollow">http://ourfiniteworld.com/2011/11/15/is-it-really-possible-t...</a>
I thought I'd read an article about new studies that put a value on the various externalities of oil using industries (e.g. pollution, congestion, motor accidents, climate change etc). Instead I got an article that pretends to show some 'actual' price of oil by mixing scales on one axis and presenting a dollar-denominated oil intensity as a 'price of oil' which is just misleading and not terribly interesting because for one it's nothing new and moreover it ignores a whole bunch of factors like outsourcing production to other countries (moving your consumption off the country's books doesn't magically mean it doesn't exist).
Excuse my conspiracy theorist but this article almost sounds like PR.<p>#1 World Oil Demand Still Growing<p><a href="http://www.schwab.com/public/schwab/nn/articles/Black-Dog-Are-Plunging-Oil-Prices-a-Positive-or-a-Negative" rel="nofollow">http://www.schwab.com/public/schwab/nn/articles/Black-Dog-Ar...</a><p>#2 The Dow Jones still looks pretty good despite the tumble to 2014 levels<p><a href="https://www.google.com/finance?q=INDEXDJX%3A.DJI&ei=flkKVsudGIjPUfCvhYAG" rel="nofollow">https://www.google.com/finance?q=INDEXDJX%3A.DJI&ei=flkKVsud...</a><p>#3 Shangai index it at 2014 EOY levels<p><a href="https://www.google.com/finance?q=SHA%3A000001&ei=mFsKVrjhEYuWUJyakNgF&hl=en" rel="nofollow">https://www.google.com/finance?q=SHA%3A000001&ei=mFsKVrjhEYu...</a><p>#4 Crude oil price is at 2009 and 2004 prices<p><a href="http://www.macrotrends.net/1369/crude-oil-price-history-chart" rel="nofollow">http://www.macrotrends.net/1369/crude-oil-price-history-char...</a><p>So either the oil price is being pushed down now, or it was pushed up before on multiple occasions, and will liked be pushed up again somewhere in the future.
> Average prices of WTI rose roughly 52-fold between 1970 and 2014, in current dollars<p>Surely that can't be right? Wouldn't that mean that 2014 price = 1970 * 2^(52) ?
Pricing of oil is directly managed by an oligopoly of players (govs, large corporations etc) on the supply side, and a diverse group of buyers with few main clusters on the demand side.<p>Stats, inflation, intensity can be misleading to deduce "what oil should become".<p>A game theoretic approach seems to be better, where main players are observed based on their moves and the outcomes with probabilities.
Price of oil must factor in cost of military presence in Middle East which should be incurred directly by oil companies, not tax payers. Once such adjusted, green energy renewables suddenly become cost effective