Quote:
Originally Posted by Leondros
Where was pricing when we started to ramp up inflation? If you are going to start at the $3.50 it would be disingenuous not to start at the $45 - $55 per barrel we were hovering around prior to COVID. I won't cherry pick the crash as that wouldn't be appropriate either. You also have to remember that the spot market wasn't invented for oil and gas until the late 70's. There really wasn't a market for oil that wasn't controlled by the 7 sisters (~95% of all oil was purchased by them and was thus not reflected of fair market price). All I am saying is I would caution you against drawing parallels between the two because the late 70's/80's was entirely the wild west with Marc Rich at the helm.
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$3-3.50 was the price for pretty much the entire decade before inflation took off, so it's a pretty appropriate starting point. The equivalent to today would be something in the $70-80 range. But even if you exclude the pre-2014 period (fair enough) and use $50 oil as the baseline, you're still looking at over $500 oil to match the price increases they saw over the '70s and early '80s.
The main issue with the '70s was it kept going up and up and up year after year, which is a big reason why inflation kept going up. It tripled in 1974 in then it went up about 50% in the next few years with no relief, before nearly tripling again in 1979-1980. All that compounding growth led to significant inflation in energy prices. By contrast, our current prices are right in line with what they were 10-15 years ago.
So they're still high, but we're not seeing the unending growth in prices that happened back then. The monthly average oil price has dropped about 25-30% in the last few months, whereas I don't think there was a single point between 1974 and 1982 where monthly oil prices dropped more than 10% from peak to trough.