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 per barrel. 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.
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?
Ah, yes. Someone managed to find words for my thoughts. I was left with the same impression that the author had adjusted for multiple factors, to the point that the result was not presenting the same data as he started with. Good that someone could spell it out :)
> 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.
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).
Economic efficiency is basically GDP / input, with the input chosen by what you're trying to measure the efficiency of. It's extremely approximate as a measure of anything real. It's easily skewed because GDP isn't a particularly good measure to start with. It's hard to take measures that use GDP very seriously for countries with large offshore banking sectors, for example.
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).
According to a documentary I recently watched (Cowspiricy) the biggest cause of CO2 / deforestation / climate change is the agricultural industry - I need to research the numbers presented in the documentary as it was eye opening and I want to be sure I'm not just being sold a vegan agenda.
I've read a similar claim in The Omnivore's Dilemma by Michael Pollan. According to Pollan, most fertilizer is manufactured with petroleum-based energy, so our agriculture is driven by fossil fuel consumption; ie natural gas -> fertilizers -> corn. This is not necessarily a vegan agenda; Pollan says we should move to solar-based agriculture by feeding animals grass instead of corn, which should incidentally make the animals tastier and more nutritious.
I'm probably a horrible person for saying this, but I'm not going to change my diet for this as I don't think there will be a widespread vegan movement based around this (one large enough that will truly disrupt the system I mean).
I think it has to become a political issue enforced with regulations.
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.
Both. Saudi Arabia has been artificially inflating the price of oil for a number of years and is now artificially keeping it low to hurt competitors. Unfortunately for them, this is already hurting Saudi economy more than anticipated and is increasingly looking like a fatal mistake.
Even though one might think it's 2^x (fold something in half twice and it's 4 times as thick, three times and it's 8, etc.) it's actually a rather archaic usage for multiplying.
That is not inflation adjusted. Also 1970 is before the usd was taken off the gold standard, and the subsequent oil shocks that followed. Gold/oil has traded in a range that whole time, while gold/usd and oil/usd has changed, well, 52 times.
Inflation adjusted today's prices are not that bad in comparison.
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.
Stats, inflation, intensity can be misleading to deduce "what oil should become".
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
That's a mischaracterization. Many libertarians believe that perpetual monopolies cannot exist in a free market due to competition. So even though a cartel might form for some time or a company may hold a monopoly on a product, if the prices are not at true market value (too high, inflated, not competitive enough), a competitor will enter the space and undercut the monopoly.
If you're interested in reading more on the topic, search for keywords: rothbard, myth of natural monopoly
I agree with you 100% on Libertarians writings that monopolies are wring.
It is my experiences with defenders of monopolies. In my conversations with dozens of Libertarians they do not agree with me that the government should limit monopolies. I have a strong academic background and find that the philosophy of Libertarians is FAR from the grass root Libertarians' beliefs.
Doesn't work if the incumbent companies are selling natural resources and have access to all resources in question.
To illustrate, imagine we were in a free market and I wanted to start an oil company to disrupt the prices of an oil cartel. How am I going to do that if I don't have any oil?
I'll counter that illustration. Let's assume that there is no oil left that doesn't have claim by an oil company and therefore you are unable to compete directly in the oil manufacturing business. But, what you are really saying is that you think that the price for what utilization oil brings is too high, and thus you can compete with oil with another resource. This means that you could invest in whale oil, coal, solar, wind, natural gas, or nuclear, or something else. If the price of oil is too high, then there is large amounts of incentive to invest in something that might not even exist.
By offering those resources to the same spaces that utilize oil, you are competing with oil. If you are able to take customers from oil, oil will be forced to reduce their prices.
As I mentioned in the previous comment, you should check out the keywords I mentioned. And if you are thinking that I'm missing something, please direct some resources my way.
You have to have an option that is better than oil, otherwise it wouldn't work. Imagine if car fuel prices were being kept artificially high, how are you going to compete? If you invest in something new, it has to be better than oil. We're lucky in this case that electric cars have numerous benefits, but suppose for a second that they didn't exist. It's possible to run a car on natural gas, coal, etc... but there are hugh costs to competing... investment in new vehicles and investment in service stations and fuel transport being some of the biggest costs. And who's to stop the oil cartel waiting for you to launch, lowering their prices to undercut you, waiting for the competition to fail, then jacking prices back up again?
Most of the "taxes" you have include to make it "the most friction applied of almost any commodity" to are royalities.
The government for country X owns the land and leases it to E&P companies under an agreement that they will pay a Y% royalty in addition to taxes. In other words, I own this, but I'll let you produce it for me for a Y% cut.
Royalties are taxes in a strict sense, but they would be paid if it were a private landowner as well (though the government usually has more leverage to negotiate a better deal than an individual landowner).
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?