Sunday, August 03, 2008

Historic Oil Prices - Peak Oil Phenomenon

I think this link from Forbes is really interesting. It shows that the oil industry had pretty spectacular prices at the beginning of the industry (1861) that were driven down by efficiency and productivity improvements. This happened remarkably quickly because by 1880, the real price of oil hit the low where it would remain for almost 100 years.

1978 was understandably a pretty shocking time - oil prices shot up to the levels only seen more than 100 years previously, near the start of the oil industry. Fortunately, prices plummeted, and we all convinced ourselves everything was going to be ok. It's clear that that was only a fifteen year reprieve. Oil prices now are once again at spectacular prices. However, this time they are higher than ever seen previously in the history of the industry.

Given the concept of peak oil, which I wholly believe - in part due to what I learned during my stint at Esso (Exxon) as a reservoir engineer, we're going to continue to see price increases until substitutes can be obtained. While oil prices are often discussed, I think this graph really puts an interesting historical perspective on things.

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