This cover of Time appeard on April 14, 1996. The lead article started off,
The epic oil plunge of the 1980s started out slowly and a bit remotely. To most people, it was just a downward-sloping diagram on the financial page, an abstract reminder of the mysterious world of desert oil wells, filthy-rich Arabs and the irritating antics of OPEC. But suddenly oil’s new situation is hitting home with the wallop of a 42-gal. oil barrel dropped on the front porch. Last week consumers, businessmen and traders around the world watched in awe as the price of crude dipped below $10 per bbl. for the first time in almost a decade. Oil, which as recently… [subscribe to read full article]
Interestingly enough, the same article by Stephen Koepp (which you can read in full) appeared on 24 June, 2001:
The epic oil plunge of the 1980s started out slowly and a bit remotely. To most people, it was just a downward-sloping diagram on the financial page, an abstract reminder of the mysterious world of desert oil wells, filthy-rich Arabs and the irritating antics of OPEC. But suddenly oil’s new situation is hitting home with the wallop of a 42-gal. oil barrel dropped on the front porch. Last week consumers, businessmen and traders around the world watched in awe as the price of crude dipped below $10 per bbl. for the first time in almost a decade. Oil, which as recently as January was selling for $26 per bbl., was on a breathtaking–and dangerous–ride down a slippery slope.
Not being a subscriber to Time, I’d be interested to know if the oil price mentioned was changed to reflect the current situation, or if the article was sheer copypasta.
At any rate, tracking the historical price of oil online is fraught with difficulty. One chart from Mactrotrends (click through for the interesting interactive version) shows oil dropping at its lowest recent point to $16.28 per barrel in 1998 – I remember that around that time, the price of gas on the street dropped below $1.00 for the first time in ages.
The problem with a lot of charts on the web is that they show prices adjusted for inflation rather than the price actually paid:
This article, from whicht the chart above was gathered, mentions crude oil prices plummeting to below $10.00 per barrel, but that doesn’t agree with the previous data from Macrotrends, unless one looks at the “Nominal” price rather than the price in 2010 dollars.
Interesting to note are the actual prices on the street for gasoline over time.
This chart of Texas prices shows gas dipping below $1.00 for almost a full year in 1995-1996, but the trend now is decidedly downward, and even this chart is out of date – as of January 29, 2016, gas is selling for $1.39 in the Dallas/Fort Worth area. Given what oil prices are doing lately, we are marching amazingly close to that $1.00 boundary, and I will be interested to see what the next few months bring. The 5-year chart from GasBuddy shown below gives you an idea of the trend:
Yesterday I paid $1.75 in Lewiston, Maine, at BJ’s (a shopping club like Costco), but I noticed that many places were pushing that price anyway.
What’s of interest to me is that gas station owners (while they appreciate lower prices of wholesale stock because it does translate into higher profits, haven’t seen a major improvement in their bottom line as a result of fuel sales in over half a century:
Notice that the 20¢ price of gas leaves only 4¢ profit for the station owner in 1955, whereas CBS Money Watch (worth reading) reported in 2014:
“…you should know that after all the ups and downs in a year, gas stations do not make much money from selling gasoline. After credit card fees and other operating costs, net profit for gasoline sales averages 3 cents a gallon, according the National Association of Convenience Stores.”
That means that profit margins on gasoline sales have remained historically paper-thin.
My wife’s father at his Shell station in the 50s. He could have been selling gas at these prices.
As of January 2016, taxes in Maine look like this:
State Excise Tax: 30¢
Other Taxes and Fees: .01¢
Total State Taxes and Fees: 30.01¢
Federal Excise Taxes: 18.40¢
Grand total: 48.41¢
Factor in wholesale costs and other operating costs and fees, and it’s easy to see why a gas station that depended solely on fuel sales would be out of business in a week, much like movie theaters depending on concession sales to stay afloat.
Oil prices dropping again. and only the good Lord knows when the trend will reverse itself. Still, in the changing production landscape which differs from that of 1996 with fracking and oil shale and all sorts of other sources going on, there are winners and losers – this New York Times article outlines the current situation in terms that can be understood by someone other than the late John Nash. The Times predicts that prices are not likely to rise any time soon.
Naturally, for travelers and for those who heat their homes with oil (like me,) this is a boon. If you want to take a cross-country trip, the time is definitely now. On the other hand, the loss to the losers may ultimately be significant enough that drastic measures will be take to raise prices, which will once again curtail supply.
What’s clear to me is that as a nation we need to wean ourselves off dependence on oil, both domestic and foreign. (This is said realizing that for the foreseeable future, oil cannot be completely replaced in our economy.) Trends are encouraging, with efficient electric and self-driving vehicles on the visible horizon, as well as a growing green-energy sector. This is not even factoring in the impact of oil-combustion emissions on global climate change. Anything that can be done to swap as many kilowatts of electricity as possible from oil (and coal) to renewable sources will be a good thing.
The Old Wolf has spoken.
Wind power? I’m a big fan.