Incidentally, this chart from the Wall Street Journal is a very useful little history of oil prices. You can see what happened in the eighties, as demand sagged, and also the amazing run-up we've had over the last few years.
One of the things that I was struggling to get across at a dinner a few weeks ago is how discontinuous prices on inelastic goods can be. That is, a few percentage points increase in demand against a relatively fixed supply doesn't produce a few percentage points increase in price: it can produce huge spikes. That's not intuitive; we feel as if prices and demand should grow at approximately the same rate. But people in the world have a lot of spare income they can use to bid up the price of oil; the speed with which its price is increasing is a measure of just how useful the stuff is.
Oh, how quaint! Oil just reached a nominal high of $78 ... ah, to live in such naive days...
If you think on it... those 20 years after the early 80's fall, were completely wasted time. Our generation got very comfortable with the fact that it would always be cheap, because we never had to pay for it when it was expensive, even when we remembered '73 and the embargo. I didn't think too much on it as an 8 yearold, and my parents owned volkswagens, and early toyotas then anyway... [Urban hippies kinda sorta]...
This is the counterintuitive part we missed. I can remember being taught that oil would run our someday, and then alternatives would have to show up... but then the price fell a lot, and that wich people don't wish to see, they don't. There is no incentive for anyone to expand technology when there is no market for it.
Which is why, we spent those 20 years doing very little. We may look back someday and compare that time to Ike's decade, because there was nothing churning, except information tech. Information tech was the thing buffering upheaval, by increasing productivity...
Sad as it sounds, till gasoline is $4 or more, the change just isn't worth it. If you buy a prius today, you won't even break even on the difference in price, vs the difference in fuel it takes, on a comparably sized regular car...
Which is probably why at least some of the business types around George W. Bush are scared green at the prospect of a war with Iran. Shutting down the Hormuz Strait or Iran's attacking other oil storage places in the area (which they have threatened to do if the US attacks them) is liable to cause 200$/bbl oil or higher price spikes.
I don't think the US economy can really deal with that very easily....
I figure $200 oil means about $5 gas. The $2 premium over today's price means another 10 cents per mile at 20 mpg (big car or small truck.) I'm guessing the average person spends at least 50 cents a mile, with vehicle depreciation taking the largest share of that. So when we see $5 gas, I'll expect to see lots of demagoguery from our leaders, lots of whining from the people, and people driving their cars for another year or two to make up the cost difference. Times will be bad in Detroit and great in Riyadh.
Of course, Insight owners who know how to drive will only pay another 3 cents/mile. Big pickups that get 10 mpg will pay an extra 20 cents/mile, which is enough to make those vehicles a lot less popular.
This is the result of in-head calculating on the bus. If anyone has better numbers please share.
I've always used this:
http://www.wtrg.com/oil_graphs/oilprice1947.gif
from
http://www.wtrg.com/
It's been around for 10 years or so, and gets updated regularly.