Wednesday, 13 January 2016

Is Oil "Cheap"?

One year ago today, I wrote Is Oil "Cheap"? Some people were arguing oil was "cheap" with Brent futures at $46 per barrel.

I pointed out that oil prices had still increased more than other key items since 1990 and 2000.

Below is an update to that table I posted comparing the change in headline CPI, Brent oil prices, Food, and Case-Shiller house prices since 1990 and 2000.

Things have changed now with Brent futures under $32 per barrel.

CPI is up 87% since 1990, but Brent is only up 51%.

Since 2000, CPI is up 41% and Brent is up 25%.

Change Since 1990 2000
CPI 87% 41%
Brent Oil 51% 25%
Food 91% 50%
Case-Shiller House Prices 127% 74%


So, compared to 1990 and 2000 prices, maybe oil is now "cheap".

Note: This is another way of saying that in real terms - inflation adjusted - oil prices are now below prices in 1990 and 2000.

from Calculated Risk http://ift.tt/200qjUM
via YQ Matrix

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