Excellent article but you, like everyone else, commit a serious chart crime by not adjusting the oil price for inflation. You show data going all the way back to 2006. Inflation is 50% since that time. https://www.usinflationcalculator.com/ In other words, oil at $72 is the equivalent of $48 in 2006--extremely cheap relative to most of the last $50 years. Ultimately, supply and demand dictate price, but the notion that the nominal price should be at a certain level because prices were at that same nominal level years ago when inventory levels were comparable strikes me as odd.
Yeah you can run this chart a few ways, but we went with the nominal calc. The real price would unnecessarily bias you I think. Refinery margins coupled with crude prices. Those two things once they get above $180, the world gets a bit "squirrelly". Meaning demand destruction starts to set in. That's a nominal price. If you had used real price in all the calcs, concerned that you'd be pegging your expectations to an even higher price than the world can handle. You make a fair point, so providing a bit of context on how we see it.
Bears can be warm and fuzzy. Their parents hated them so we must be patient 😉
Excellent article but you, like everyone else, commit a serious chart crime by not adjusting the oil price for inflation. You show data going all the way back to 2006. Inflation is 50% since that time. https://www.usinflationcalculator.com/ In other words, oil at $72 is the equivalent of $48 in 2006--extremely cheap relative to most of the last $50 years. Ultimately, supply and demand dictate price, but the notion that the nominal price should be at a certain level because prices were at that same nominal level years ago when inventory levels were comparable strikes me as odd.
Yeah you can run this chart a few ways, but we went with the nominal calc. The real price would unnecessarily bias you I think. Refinery margins coupled with crude prices. Those two things once they get above $180, the world gets a bit "squirrelly". Meaning demand destruction starts to set in. That's a nominal price. If you had used real price in all the calcs, concerned that you'd be pegging your expectations to an even higher price than the world can handle. You make a fair point, so providing a bit of context on how we see it.