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The Real Price of Oil

September 09, 2008 | 39,784 views

The price of oil is up, and everyone is worried about the potential economic consequences. But what if the price of oil wasn’t really up? What if it were just an illusion?

The American Geological Institute (AGI) recently released a report looking at the price of crude oil in relation to the U.S. dollar and the price per ounce of gold. They found that the price of oil has been going up in relation to currency only. This means that the value of oil has not been increasing in real terms; instead, currency has just been decreasing in value.

In other words, if U.S. currency were still based on gold, as it was until 1971, then the price of oil would be stable.

Oil Chart

So if you are an American, the price of gas hasn’t really gone up, it is just that the value of the dollar has significantly plummeted.

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