Real Value Of Money And Barrel Of Oil Cost

In January of 1981 the price for a barrel of oil was $38.75.

Realize that we are talking about the price for a barrel using "1981 dollars".

If we figure out what that price translates into, using real, inflation-adjusted dollars, that 1981 barrel of oil would cost $86.71 in today's dollars.

Now consider this...

On 20 September 2005 the spot price for a barrel of crude oil in 2005 dollars was $65.90!

So, are crude oil prices high today versus historical prices?

Not when you look at the numbers using real, inflation adjusted dollars and...

Not when you realize that there is a heck of a lot less crude supplies (buried and above ground) today than there were back in 1981.

Because of efficiencies in transportation and processing we've been able to bring down the cost of a barrel of crude oil even while supplies where diminishing.