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Energy Insight: Historical crude oil prices 1861 - 2016

EI Knowledge; 30/10/2017

What is being priced?

Benchmark crudes: Because there are a large number of different grades and varieties of crude oil, a benchmark crude or marker crude is a crude oil that serves as a reference price for buyers and sellers. There are three main benchmarks:

West Texas Intermediate (WTI)
Brent Blend
Dubai Crude

There are others, such as Nigerian Bonny and Arabian Light, that are also used.

Real and Nominal crude oil prices

While prices appear to vary widely over time, they need to be looked at in the context of the value of money at the time and its current value.

Nominal prices: measure the dollar value of a product at the time it was produced.

Real prices are adjusted to take into consideration general price changes over time, for example inflation.

The chart below shows the nominal prices of crude oil from 1860 to 1988:

(Figures taken from Jenkins, Gilbert. Oil Economists Handbook. 5th ed. 1989.)

The prices from 1860 to 1944 are US average crude prices. From 1945 to 1988 the prices shown are Arabian Light, the Saudi Arabian /Arabian Gulf Benchmark price.

For prices after 1988, EI members can see our datasheets:

DSS13 OPEC Crude Prices and DSS14 for North Sea Prices

For a table and graph showing the real vs nominal values of crude oil from 1860, see the Chartsbin Historical Crude Oil prices, 1861 to Present. Their chart also shows what can be described as the Oil shocks when prices rose due to global or local events.

Timeline and milestones

1861 – 1865: The American Civil War led to increased demand and drop in supply due not only to the war but also to the earlier abandonment of a large number of drilling prospects when a huge increase in production led to a drop in prices:- $20 /bbl in 1859 to $2 in 1860 and down to 10c. by the end of 1861.

1876 – 1970: the nominal price was very stable with small spikes just after the end of the First World War and again after the Second. From the turn of the 20th Century, oil, for heating, lighting, transport and petrochemicals began to play an increasingly important part in the world economy. Use increased substantially as did production.

1973: the first oil crisis following the 1973 Middle East War took 5 million barrels / day of OPEC crude off the world market and crude prices rose from $2.30 in January 1973 to $11.65 by January 1974. (The rise in the price of oil meant more oilfields elsewhere in the world, such as those in the North Sea, becoming economically feasible to explore for and develop.)

1979: following the Iranian revolution with around 2 million b/d taken off the market, prices increased again from $13 in October 1978 to $40 by November 1979. From this high, the average price gradually fell to just under $11 by the end of 1988.

1988-1990: OPEC members continued to attempt to regulate the price of oil on the world markets by agreeing production quotas for each member country. However, most world events are beyond their control, as is the amount of oil produced by non-OPEC member countries.

1990-2000: oil prices remained mainly below the $20 bbl mark following Iraq’s failed attempt to conquer Kuwait and acquire their oilfields. Then in the late 1990’s the downturn in Asian economies led to a decrease in demand for oil just as OPEC abandoned its restrictions on production.

2001-2002: Prices began to rise at the turn of the 21st century, only to be knocked back again due to the increase in Russian production and the 9/11 terror attacks on the USA in 2001. OPEC tried to keep prices up by cutting production, but prices didn’t begin to rise until 2002.

2003: oil prices started to rise as the Iraq war reduced the production and exports of oil from Iraq by over 60 million tonnes, and dropped them from the 10th largest oil producer in the world in 2002 to the 17th. (Iraq didn’t regain its position in the top 10 oil producers until 2009.)

2006-2008: Conflict between Israel and Lebanon in 2006 raised tensions in the Middle East and the price of oil rose even more steeply. The $100 a barrel price was passed in 2008 caused by US threats of sanctions against Iran, and tensions in other parts of the world.

2008: the oil price plummeted to just over $60 due to errors by oil traders, and the start of a world-wide financial crisis.

2008-2012: the oil price rose again reaching an all-time high in 2012 due to tightening sanctions against Iran and output disruptions in Libya, Nigeria and Syria.

2014: the price fell again as OPEC decided not to curb its production, there was a reduction in demand from Europe and Asia, and an increased supply of other forms of energy such as shale oil and gas and renewables.

FURTHER INFORMATION

More information on crude oil prices can be found in the EI Knowledge website (this searches the database for everything on oil prices).

For some comment on current prices and consumption, supply and demand, as well as a large amount of statistical detail, the BP Statistical Review is very useful.

Comparing historical and current prices

Before considering the price of oil over the past 150 years, it may be worth looking at the Measuring Worth database. This puts cost in perspective by comparing it with the general value of money at a particular time.

Energy Insight details

Subjects: Oil and gas, Oil prices