Your prices for crude oil are inflation-adjusted but they are not adjusted for earnings. You should look at the time price (how many hours to work for the same item over time). Gale Pooley has shown how that is a better measure of abundance.
Arg, my edits have vanished. Briefly, again: You choose the lowest point to compare to today, which could be misleading. Of course you are correct that we will never run out of oil. So long as the market is allowed to operate, we will move away from using oil for purposes that can be served more cheaply by other means -- reserve oil for its essential uses. Also, we can create new fuels with enough inexpensive energy.
Since 1950, the time price of gasoline for US blue-collar workers has fallen by 35 percent. For the time it took to earn enough money to buy a gallon of gasoline in 1950, today’s blue-collar workers can buy 1.54 gallons. That means personal gasoline abundance has increased by 54 percent.
There's no denying the real cost of crude is on the way up. In the 1960's the Majors were producing oil in the mid-East for a penny a liter, and a sizable portion of that was rent to local war lords. You could tap the Burgan field in Kuwait with a simple, vertical 1200 foot well, and 4000 barrels of oil per day would flow out of the well, and climb up on to tankers by itself. No need for any pumps.
Contrast that with the small city of trucks and pumps and tanks surrounding just about any oil rig in the Permian. I don't care how you measure inflation, the resources required to produce a barrel oil, the real cost of oil, is up a lot. The fact that the American worker has gotten a lot wealthier between 1960 and now is not oil's fault.
I didn't deny that the real cost of oil is on the way up over the last several decades. I aimed to put it in context to show that it has not gone up as much as you implied. Time prices are a better measure of real cost. It *should* go up as it gets harder to extract. That's the market at work.
The real cost of oil is the value of the resources that must be consumed in producing the commodity in constant value dollars. Your "time price" is more a measure of the increase in American worker wealth than the real cost of extracting oil. Put another way, if the real cost of oil had not gone up dramatically, then the price of gasoline would be around $1.40/gallon and youre American workers would be still wealthier. I can assure you he is well aware of that fact.
Yeah, overall productivity has increased faster than inflation,
but that says nothing above the real cost of any particular commodity
The Cato paper is interesting and well written. But their treatment of oil is badly flawed. They picked 1980 as their base year. As the figure in this substack shows 1980 just happened to be a near historic peak in spot oil prices, thanks to the combination of OPEC and the Iranian revolution. In such peaks, price is not determined by fully built up cost. 1965 my base year may have been a low price at the end of a very long slow decline, but it wasn't much below the average of the preceding 30 years.
And it was actually above the resource cost of the commodity at the time In the 1960's Big Oil conned the American public into imposing import quotas. I called this the Drain America First policy. This maintained prices above the marginal cost of Middle East oil.
The point of time prices is to go beyond inflation-adjusting to determine how abundant or scarce something is. If a good doubles in (real) price but your income has tripled, it is more abundant to you.
For the period you pick, it may be true that the real price has risen. It may even be true that its time price has increased (I haven't checked closely). My point was (apart from your starting point, which yielded a higher increase than a more neutral point or range) was that the real cost in terms of what we give up has increased less than it seems from a real price perspective. Other forms of energy in market-based economies have gotten cheaper in time price, even if oil has not.
If you look further into examples of time prices, you will see the value of them.
Your prices for crude oil are inflation-adjusted but they are not adjusted for earnings. You should look at the time price (how many hours to work for the same item over time). Gale Pooley has shown how that is a better measure of abundance.
Arg, my edits have vanished. Briefly, again: You choose the lowest point to compare to today, which could be misleading. Of course you are correct that we will never run out of oil. So long as the market is allowed to operate, we will move away from using oil for purposes that can be served more cheaply by other means -- reserve oil for its essential uses. Also, we can create new fuels with enough inexpensive energy.
Since 1950, the time price of gasoline for US blue-collar workers has fallen by 35 percent. For the time it took to earn enough money to buy a gallon of gasoline in 1950, today’s blue-collar workers can buy 1.54 gallons. That means personal gasoline abundance has increased by 54 percent.
https://humanprogress.org/gasoline-abundance-increases-with-population-growth/
Max,
There's no denying the real cost of crude is on the way up. In the 1960's the Majors were producing oil in the mid-East for a penny a liter, and a sizable portion of that was rent to local war lords. You could tap the Burgan field in Kuwait with a simple, vertical 1200 foot well, and 4000 barrels of oil per day would flow out of the well, and climb up on to tankers by itself. No need for any pumps.
Contrast that with the small city of trucks and pumps and tanks surrounding just about any oil rig in the Permian. I don't care how you measure inflation, the resources required to produce a barrel oil, the real cost of oil, is up a lot. The fact that the American worker has gotten a lot wealthier between 1960 and now is not oil's fault.
I didn't deny that the real cost of oil is on the way up over the last several decades. I aimed to put it in context to show that it has not gone up as much as you implied. Time prices are a better measure of real cost. It *should* go up as it gets harder to extract. That's the market at work.
Youre mixing two different concepts.
The real cost of oil is the value of the resources that must be consumed in producing the commodity in constant value dollars. Your "time price" is more a measure of the increase in American worker wealth than the real cost of extracting oil. Put another way, if the real cost of oil had not gone up dramatically, then the price of gasoline would be around $1.40/gallon and youre American workers would be still wealthier. I can assure you he is well aware of that fact.
It is not my time price.
https://www.cato.org/policy-analysis/simon-abundance-index-new-way-measure-availability-resources
Sorry. Cato is mixing two different concepts.
Yeah, overall productivity has increased faster than inflation,
but that says nothing above the real cost of any particular commodity
The Cato paper is interesting and well written. But their treatment of oil is badly flawed. They picked 1980 as their base year. As the figure in this substack shows 1980 just happened to be a near historic peak in spot oil prices, thanks to the combination of OPEC and the Iranian revolution. In such peaks, price is not determined by fully built up cost. 1965 my base year may have been a low price at the end of a very long slow decline, but it wasn't much below the average of the preceding 30 years.
And it was actually above the resource cost of the commodity at the time In the 1960's Big Oil conned the American public into imposing import quotas. I called this the Drain America First policy. This maintained prices above the marginal cost of Middle East oil.
The point of time prices is to go beyond inflation-adjusting to determine how abundant or scarce something is. If a good doubles in (real) price but your income has tripled, it is more abundant to you.
For the period you pick, it may be true that the real price has risen. It may even be true that its time price has increased (I haven't checked closely). My point was (apart from your starting point, which yielded a higher increase than a more neutral point or range) was that the real cost in terms of what we give up has increased less than it seems from a real price perspective. Other forms of energy in market-based economies have gotten cheaper in time price, even if oil has not.
If you look further into examples of time prices, you will see the value of them.
Not(the end is nigh)