Oil - Oil Prices

The law of supply and demand usually explains oil price changes; the price of goods reflects a relationship

TABLE 2.4

World petroleum consumption, 1960–2002
(Million barrels per day)
	Selected OECD1 consumers											Selected Non-OECD consumers
Year	Canada	France	Germany2	Italy	Japan	Mexico3	South Korea3	Spain	United Kingdom	United States	Total OECD4	Brazil	China	India	Former U.S.S.R.	Russia	Total non-OECD	World
1Organization for Economic Cooperation and Development.
2Through 1969, the data for Germany are for the former West Germany only. For 1970 through 1990,this is East and West Germany. Beginning in 1991, this is unified Germany.
3Mexico, which joined the OECD on May 18, 1994, and South Korea, which joined the OECD on December 12, 1996, are included in the OECD for all years shown in this table.
4Hungary and Poland, which joined the OECD on May 7, 1996, and November 22, 1996, respectively, are included in total OECD beginning in 1970, the first year that data for these countries were available. OECD totals include Czechoslovakia from 1980–1992, Czech Republic and Slovakia from 1992–2002.
R=Revised.
P=Preliminary.
— = Not applicable.
Note: Totals may not equal sum of components due to independent rounding.
Web Page: For related information, see http://www.eia.doe.gov/international.
SOURCE: "Figure 11.10. World Petroleum Consumption, 1960–2002 (Million Barrels per Day)," in Annual Energy Review 2003, U.S. Department of Energy, Energy Information Administration, Office of Energy Markets and End Use, September 7, 2004, http://www.eia.doe.gov/emeu/aer/pdf/aer.pdf (accessed September 28, 2004)
1960	0.84	0.56	0.63	0.44	0.66	0.30	0.01	0.10	0.94	9.80	15.78	0.27	0.17	0.16	2.38	—	5.56	21.34
1961	0.87	0.63	0.79	0.54	0.82	0.29	0.02	0.12	1.04	9.98	16.77	0.28	0.17	0.17	2.57	—	6.23	23.00
1962	0.92	0.73	1.00	0.67	0.93	0.30	0.02	0.12	1.12	10.40	18.06	0.31	0.14	0.18	2.87	—	6.83	24.89
1963	0.99	0.86	1.17	0.77	1.21	0.31	0.03	0.12	1.27	10.74	19.60	0.34	0.17	0.21	3.15	—	7.32	26.92
1964	1.05	0.98	1.36	0.90	1.48	0.33	0.02	0.20	1.36	11.02	21.05	0.35	0.20	0.22	3.58	—	8.03	29.08
1965	1.14	1.09	1.61	0.98	1.74	0.34	0.03	0.23	1.49	11.51	22.81	0.33	0.23	0.25	3.61	—	8.33	31.14
1966	1.21	1.19	1.80	1.08	1.98	0.36	0.04	0.31	1.58	12.08	24.60	0.38	0.30	0.28	3.87	—	8.96	33.56
1967	1.25	1.34	1.86	1.19	2.14	0.39	0.07	0.36	1.64	12.56	25.94	0.38	0.28	0.26	4.22	—	9.65	35.59
1968	1.34	1.46	1.99	1.40	2.66	0.41	0.10	0.46	1.82	13.39	28.56	0.46	0.31	0.31	4.48	—	10.40	38.96
1969	1.42	1.66	2.33	1.69	3.25	0.45	0.15	0.49	1.98	14.14	31.54	0.48	0.44	0.34	4.87	—	11.35	42.89
1970	1.52	1.94	2.83	1.71	3.82	0.50	0.20	0.58	2.10	14.70	34.49	0.53	0.62	0.40	5.31	—	12.32	46.81
1971	1.56	2.12	2.94	1.84	4.14	0.52	0.23	0.64	2.14	15.21	36.07	0.58	0.79	0.42	5.66	—	13.35	49.42
1972	1.66	2.32	3.13	1.95	4.36	0.59	0.23	0.68	2.28	16.37	38.74	0.66	0.91	0.46	6.12	—	14.35	53.09
1973	1.73	2.60	3.34	2.07	4.95	0.67	0.28	0.78	2.34	17.31	41.53	0.78	1.12	0.49	6.60	—	15.71	57.24
1974	1.78	2.45	3.06	2.00	4.86	0.71	0.29	0.86	2.21	16.65	40.12	0.86	1.19	0.47	7.28	—	16.56	56.68
1975	1.78	2.25	2.96	1.86	4.62	0.75	0.31	0.87	1.91	16.32	38.82	0.92	1.36	0.50	7.52	—	17.38	56.20
1976	1.82	2.42	3.21	1.97	4.84	0.83	0.36	0.97	1.89	17.46	41.39	1.00	1.53	0.51	7.78	—	18.28	59.67
1977	1.85	2.29	3.21	1.90	4.88	0.88	0.42	0.94	1.91	18.43	42.43	1.02	1.64	0.55	8.18	—	19.40	61.83
1978	1.90	2.41	3.29	1.95	4.95	0.99	0.48	0.98	1.94	18.85	43.62	1.11	1.79	0.62	8.48	—	20.54	64.16
1979	1.97	2.46	3.37	2.04	5.05	1.10	0.53	1.02	1.97	18.51	44.01	1.18	1.84	0.66	8.64	—	21.21	65.22
1980	1.87	2.26	3.08	1.93	4.96	1.27	0.54	0.99	1.73	17.06	R41.76	1.15	1.77	0.64	9.00	—	R21.35	R63.11
1981	1.77	2.02	2.80	1.87	4.85	1.40	0.54	0.94	1.59	16.06	R39.49	1.09	1.71	0.73	8.94	—	R21.45	R60.94
1982	1.58	1.88	2.74	1.78	4.58	1.48	0.53	1.00	1.59	15.30	R37.77	1.06	1.66	0.74	9.08	—	R21.77	R59.54
1983	1.45	1.84	2.66	1.75	4.40	1.35	0.56	1.01	1.53	15.23	R36.91	0.98	1.73	0.77	8.95	—	R21.87	R58.78
1984	R1.52	R1.77	R2.56	R1.72	R4.67	R1.40	R0.55	R0.85	R1.83	15.73	R37.70	1.03	1.74	0.82	8.91	—	R22.13	59.83
1985	R1.53	R1.75	R2.65	R1.71	R4.44	R1.48	R0.55	R0.86	R1.62	15.73	R37.48	1.08	1.89	R0.89	8.95	—	R22.61	60.09
1986	R1.53	R1.76	R2.79	R1.73	R4.50	R1.52	R0.59	R0.87	R1.64	16.28	R38.61	1.24	2.00	0.95	8.98	—	R23.22	R61.83
1987	R1.61	1.79	R2.72	R1.82	R4.57	R1.58	R0.63	0.90	R1.61	16.67	R39.37	1.26	2.12	0.99	9.00	—	R23.76	R63.13
1988	R1.68	1.80	R2.72	R1.83	R4.85	R1.60	R0.75	0.98	R1.69	17.28	R40.68	1.30	2.28	1.08	8.89	—	R24.32	R65.00
1989	R1.75	R1.84	2.58	R1.90	R5.06	R1.72	R0.86	R0.98	R1.73	17.33	R41.34	1.32	2.38	1.15	8.74	—	R24.76	R66.10
1990	R1.75	R1.83	R2.68	1.87	R5.30	R1.75	R1.05	1.01	R1.78	16.99	R41.60	1.47	2.30	1.17	8.39	—	R24.93	R66.53
1991	R1.67	1.94	2.83	1.86	R5.37	R1.83	R1.26	1.07	1.80	16.71	R41.97	1.48	2.50	1.19	8.35	—	R25.13	R67.10
1992	R1.73	1.93	2.84	R1.89	R5.49	R1.86	R1.53	R1.10	R1.82	17.03	R42.92	1.52	2.66	1.27	—	4.42	R24.32	R67.24
1993	R1.76	1.88	R2.91	R1.89	R5.41	R1.84	R1.68	1.06	R1.83	17.24	R43.29	1.58	2.96	1.31	—	3.75	R24.11	R67.40
1994	R1.77	R1.87	2.88	R1.87	R5.70	R1.93	R1.84	R1.12	R1.83	17.72	R44.46	1.67	3.16	1.41	—	3.18	24.25	R68.71
1995	R1.81	R1.92	2.88	R1.94	R5.73	R1.82	2.01	R1.19	R1.81	17.72	R44.91	1.79	3.36	1.57	—	2.98	R25.09	R70.00
1996	R1.87	R1.95	R2.92	R1.92	R5.77	R1.79	R2.10	R1.20	1.85	18.31	R45.98	1.90	3.61	1.68	—	2.62	R25.52	R71.50
1997	R1.95	R1.97	R2.92	R1.93	R5.72	1.85	R2.25	R1.27	1.80	18.62	R46.71	2.03	3.92	1.77	—	2.56	26.49	R73.20
1998	1.95	R2.04	2.92	R1.94	R5.52	1.95	R1.92	R1.36	1.79	18.92	R46.87	2.10	4.11	1.84	—	2.49	R27.01	R73.88
1999	2.03	2.03	2.84	R1.89	R5.61	R1.96	R2.08	R1.40	R1.79	19.52	R47.76	2.13	4.36	2.03	—	2.54	R27.97	R75.73
2000	R2.02	R2.00	R2.77	R1.85	R5.48	R2.04	R2.14	R1.43	R1.76	19.70	R47.85	2.17	4.80	2.13	—	2.58	R28.98	R76.83
2001	R2.04	R2.05	2.81	R1.84	R5.39	R1.99	R2.13	R1.49	1.72	19.65	R47.90	R2.21	R4.92	R2.18	—	R2.74	R30.10	R78.00
2002P	2.09	1.98	2.72	1.85	5.30	1.98	2.18	1.51	1.70	19.76	47.82	2.16	5.16	2.19	—	2.58	30.39	78.21

FIGURE 2.10

FIGURE 2.11

between the supply (availability) and the demand (need). Higher prices increase production, as it becomes profitable to operate more expensive wells, and reduce demand, as consumers lower usage and increase conservation

FIGURE 2.12

efforts. The factors also work the other way: Reduced demand or increased supply generally cause the price of oil to drop.

The demand for petroleum products varies, and petroleum prices usually fluctuate with demand. Heating oil demand rises during the winter. A cold spell, which leads to a sharp rise in demand, may result in a corresponding price increase. A warm winter may be reflected in lower prices as suppliers try to clear out their inventory. Gasoline

FIGURE 2.13

demand rises during the summer, when people drive more on vacations and for recreation, and gas prices usually rise as a consequence. Petroleum demand also reflects the general condition of the economy. During a recession, demand for and production of petroleum products drops. Wars and other types of political unrest in oil-producing nations add volatility to petroleum prices, which fluctuate—sometimes dramatically—depending on the situation at the time.

While consumers prefer low prices that allow them to save money or get more for the same price, producers naturally prefer to keep prices high. Oil producers formed the OPEC cartel in 1960. A cartel is a group of businesses that agree to control production and marketing to avoid competing with one another. Since 1973 OPEC has tried to control the oil supply in order to achieve higher prices.

OPEC has faced long-term problems, however, because high prices in the late 1970s to mid-1980s encouraged conservation, reducing demand for oil and leading to a sharp decline in oil prices. As a result of the decreased demand for oil and lower prices, OPEC lost some of its ability to control its members and, consequently, prices.

Nevertheless, OPEC actions can still effectively influence the petroleum market. For example, in an attempt to halt the downward slide of oil prices in 1999, Saudi Arabia, Mexico, and Venezuela agreed to cut production by 1.6% to 2 million barrels a day. Many other oil-producing nations also limited their production. The limitations worked: During the summer of 2000 oil prices climbed. According to a 2001 report by the Energy Information Administration (EIA) of the Department of Energy (Annual Energy Review 2000), the price in real dollars paid by refiners for crude oil in 1999 averaged $16.71 per barrel, and in 2000 averaged $26.40 per barrel.

Gasoline Prices

Many middle-aged and older Americans can remember when gas cost 30 cents per gallon in the early 1970s. From 1973 to 1981, the price of a gallon of leaded regular gasoline (in current dollars that do not consider inflation) more than tripled, while the price in real dollars (adjusted for inflation) rose 81%. (See Table 2.5.) In real dollars the price of a gallon of regular unleaded gasoline was $2.33 in 1981. However, after 1981, as a result of the international oil glut,

TABLE 2.5

Retail motor gasoline and on-highway diesel fuel prices, 1949–2003
(Dollars per gallon)
	Motor gasoline by grade								Regular motor gasoline by area type1
	Leaded regular		Unleaded regular		Unleaded premium		All grades
Year	Nominal	Real2	Nominal	Real2	Nominal	Real2	Nominal	Real2	Conventional gasoline areas3,4	Reformulated gasoline areas5,6	All grades	On-highway diesel fuel1
1Nominal dollars.
2In chained (2000) dollars, calculated by using gross domestic product implicit price deflators.
3Any area that does not require the sale of reformulated gasoline.
4For 1993–2000, data collected for oxygenated areas are included in "Conventional gasoline areas."
5"Reformulated Gasoline Areas" are ozone nonattainment areas designated by the Environmental Protection Agency that require the use of reformulated gasoline.
6For 1995–2000, data collected for combined oxygenated and reformulated areas are included in "Reformulated Gasoline Areas."
R = Revised.
NA = Not available.
Web Page: For data not shown for 1951–1969, see http://www.eia.doe.gov/emeu/aer/petro.html. For related information, see http://www.eia.doe.gov/oil_gas/petroleum/info_glance/petroleum.html.
SOURCE: "Table 5.24. Retail Motor Gasoline and On-Highway Diesel Fuel Prices, Selected Years, 1949–2003 (Dollars per Gallon)," in Annual Energy Review 2003, U.S. Department of Energy, Energy Information Administration, Office of Energy Markets and End Use, September 7, 2004, http://www.eia.doe.gov/emeu/aer/pdf/aer.pdf (accessed September 28, 2004)
1949	0.27	R1.64	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1950	0.27	R1.62	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1955	0.29	R1.55	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1960	0.31	R1.48	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1965	0.31	R1.39	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1970	0.36	R1.30	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1971	0.36	R1.26	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1972	0.36	R1.20	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1973	0.39	R1.22	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1974	0.53	R1.53	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1975	0.57	R1.49	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
1976	0.59	R1.47	0.61	R1.53	NA	NA	NA	NA	NA	NA	NA	NA
1977	0.62	R1.46	0.66	R1.53	NA	NA	NA	NA	NA	NA	NA	NA
1978	0.63	R1.37	0.67	R1.46	NA	NA	0.65	R1.43	NA	NA	NA	NA
1979	0.86	R1.73	0.90	R1.82	NA	NA	0.88	R1.78	NA	NA	NA	NA
1980	1.19	R2.20	1.25	R2.30	NA	NA	1.22	R2.26	NA	NA	NA	NA
1981	1.31	R2.22	1.38	R2.33	1.47	R2.49	1.35	R2.29	NA	NA	NA	NA
1982	1.22	R1.95	1.30	R2.07	1.42	R2.26	1.28	R2.04	NA	NA	NA	NA
1983	1.16	R1.77	1.24	R1.90	1.38	R2.12	1.23	R1.88	NA	NA	NA	NA
1984	1.13	R1.67	1.21	R1.79	1.37	R2.02	1.20	R1.77	NA	NA	NA	NA
1985	1.12	R1.60	1.20	R1.72	1.34	R1.92	1.20	R1.72	NA	NA	NA	NA
1986	0.86	R1.20	0.93	R1.30	1.09	R1.52	0.93	R1.31	NA	NA	NA	NA
1987	0.90	R1.23	0.95	R1.30	1.09	R1.49	0.96	R1.31	NA	NA	NA	NA
1988	0.90	R1.19	0.95	R1.25	1.11	R1.46	0.96	R1.27	NA	NA	NA	NA
1989	1.00	R1.27	1.02	R1.30	1.20	R1.52	1.06	R1.35	NA	NA	NA	NA
1990	1.15	R1.41	1.16	R1.43	1.35	R1.65	1.22	R1.49	NA	NA	NA	NA
1991	NA	NA	1.14	R1.35	1.32	R1.56	1.20	R1.42	1.10	NA	1.10	NA
1992	NA	NA	1.13	R1.31	1.32	R1.52	1.19	R1.38	1.09	NA	1.09	NA
1993	NA	NA	1.11	R1.25	1.30	R1.47	1.17	R1.33	41.07	NA	1.07	NA
1994	NA	NA	1.11	R1.23	1.31	R1.45	1.17	R1.30	1.07	NA	1.08	NA
1995	NA	NA	1.15	R1.25	1.34	R1.45	1.21	R131	1.10	61.16	1.11	1.11
1996	NA	NA	1.23	R1.31	1.41	R1.51	1.29	R1.37	1.19	1.28	1.22	1.24
1997	NA	NA	1.23	R1.29	1.42	R1.48	1.29	R1.35	1.19	1.25	1.20	1.20
1998	NA	NA	1.06	R1.10	1.25	R1.30	1.12	R1.16	1.02	1.08	1.03	1.04
1999	NA	NA	1.17	R1.19	1.36	R1.39	1.22	R1.25	1.12	1.20	1.14	1.12
2000	NA	NA	1.51	R1.51	1.69	R1.69	1.56	R1.56	1.46	1.54	1.48	1.49
2001	NA	NA	1.46	R1.43	1.66	R1.62	1.53	R1.50	1.38	1.50	1.42	1.40
2002	NA	NA	1.36	R1.31	R1.56	R1.50	1.44	R1.39	1.31	1.41	1.35	1.32
2003	NA	NA	1.59	1.51	1.78	1.68	1.64	1.55	1.52	1.66	1.56	1.51

real prices tumbled. In 1998 the price was only $1.10, and after price increases in 1999, the price of gas still only averaged $1.51 in 2000 and 2003. By the fall of 2004, however, gasoline prices hovered around $2.00 per gallon.