Are We Running Out of Oil?

January 15, 2005

Are We Running Out of Oil?

It is important to look at inflation adjusted (real) oil prices to understand what has happened over the last two to three decades.

This chat only goes through 1999. But, you can see that after hitting its high in real terms, the price of oil has generally been in decline. In 1979 oil prices on the spot market hit $40 per gallon in nominal terms. Using the inflation calculator on the BLS website, we can see that $40 in real terms would be approximately $105 today.

Since oil prices on Friday, January 14, 2005 were approximately $48.00 per barrel, you can see that in real terms oil prices today are less than half the 1979 peak price for oil. The other day, I listened to a discussion on the radio concerning world oil supply. The guest claimed that the world would soon be running out of oil. Since price is an aggregation of information held be participants in the market, a belief that the world is running out of oil would be reflected in the price. Looking at the long-term trend in oil prices, will the world be running out of oil any time soon?

		January 15, 2005 *Are We Running Out of Oil?*
	It is important to look at inflation adjusted (real) oil prices to understand what has happened over the last two to three decades. This chat only goes through 1999. But, you can see that after hitting its high in real terms, the price of oil has generally been in decline. In 1979 oil prices on the spot market hit $40 per gallon in nominal terms. Using the inflation calculator on the BLS website, we can see that $40 in real terms would be approximately $105 today. Since oil prices on Friday, January 14, 2005 were approximately $48.00 per barrel, you can see that in real terms oil prices today are less than half the 1979 peak price for oil. The other day, I listened to a discussion on the radio concerning world oil supply. The guest claimed that the world would soon be running out of oil. Since price is an aggregation of information held be participants in the market, a belief that the world is running out of oil would be reflected in the price. Looking at the long-term trend in oil prices, will the world be running out of oil any time soon?