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The ‘Real’ Price of Crude Oil

Published online by Cambridge University Press:  26 March 2020

G. F. Ray
G. F. Ray*
Affiliation:
National Institute of Economic and Social Research
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Abstract

This note traces the course of the price of crude oil back to 1880 and attempts to assess the changes in its purchasing value by deflating it by the export prices of manufactured goods. The purchasing power of the posted price of crude oil declined through the 1960s, even without allowance for significant discounts, and then trebled in 1974. The sixfold nominal rise of the oil price from 1972 to 1977 compares with a 150 per cent increase in the prices of other primary products, and a rise of about 75 per cent in the price level of manufactured goods in world trade.

Type
Articles
Information
National Institute Economic Review , Volume 82 , November 1977 , pp. 59 - 61
Copyright
Copyright © 1977 National Institute of Economic and Social Research

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References

(1) National Institute Economic Review, No. 81, August, 1977, pp 72-76.

(2) For explanation of terms marked by*, see Glossary, page 00.

(3) The movement of the price of heavy fuel oil at Rotterdam, the most important market for oil products, is supposed to reflect the changes in the ‘armslength’ prices of crude oil fairly well; from $ 14-15 per tonne in 1960-61 this rose to $17 in 1963, fell to $12 in 1967-68, reached its lowest point at $10 in 1969, then improved to between $14 and $18 in the years 1970-72, and rose to $69 in 1974.

(4) A. Maizels, Industrial growth and world trade, Cambridge University Press, 1963 (Table 4.1, page 80).

(1) Jenkins, op. cit.