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202 comments on DrumBeat: January 9, 2009

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westexas on January 9, 2009 - 11:10am Permalink | Subthread | Comments top

The EIA has released the annual price data for 2008, and as expected, the average 2008 spot price is slightly (35¢) below $100:

Here are the year over year exponential changes in US spot oil prices since 1998 (the one annual decline is highlighted):

1999: +30%/year
2000: +45%/year
2001: -16%/year
2002: +1%/year
2003: +17%/year
2004: +29%/year
2005: +31%/year
2006: +15%/year
2007: +9%/year
2008: +32%/year

The 10 year (1998-2008) rate of increase was +19%/year (doubling about every 3.8 years).

If oil prices average $50 in 2009, the 11 year rate of increase will be +11%/year (doubling about every 6.5 years), and the year over year decline rate would be -69%/year (a 50% reduction in price in one year).

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ThatsItImout on January 9, 2009 - 2:17pm Permalink | Subthread | Parent | Comments top

westexes,

Since I have learned so much from you here on TOD, I owe ya' a favor...so take it for what it's worth, just don't bet every cent you got on that curve, o.k.?

:-)
RC

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westexas on January 9, 2009 - 2:52pm Permalink | Subthread | Parent | Comments top

Nothing to bet on, the curve, through 2008, is historical. Nothing is going to change it.

But it will be interesting to see what the next 10 years looks like--out to 2018.

Using the three exponential rate of change numbers referenced above:

At +19%/year (1998 to 2008 rate of increase), nominal oil prices in 2018 would be $668.

At +11%/year, nominal oil prices in 2018 would be $300.

At -69%/year, nominal oil prices in 2018 would be 10¢ per barrel.

(There is actually a certain symmetry to 2018, versus 2008. Our middle case is that the top five have, through 2008, shipped about 20% of their post-2005 cumulative net oil exports, and our middle case is that by 2018, halfway to projected near zero net exports, they will have shipped about 80% of their post-2005 cumulative net oil exports.)

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polytropos on January 9, 2009 - 3:52pm Permalink | Subthread | Parent | Comments top

so WT,
if we assume that gold is an inflation hedge, and gold has increased at a rate of 11% / year on average over the past 10 years ($290 - $850)
then 11% is the real rate of inflation

if you deflate oil by the rate of growth of gold over that last 10 years

19% - 11% = 8% real growth in oil prices over and above inflation

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polytropos on January 9, 2009 - 4:05pm Permalink | Subthread | Parent | Comments top

or of course you could say that becuase golds rate of increase over the past 40 years has been about 8.9% per year (better than the S&P!) so perhaps oil, once it got out of an over supply situation, was mostly driven by inflation for most of the past 10 years,

and it is now driven by a declining supply to go beyond the "gold inflation rate" if the nominal rate of 10-20% keeps up

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202 comments on DrumBeat: January 9, 2009

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