**What is the real price of oil compared to our purchasing power (minimum wage) and corrected by inflation and monetary parity?**

*Keywords: price, barrel, oil, crude, $, dollars, euro, €, parity, conversion, corrected.*

**From an economic point of view**

The symbolic bar of $ 50 a barrel of oil has been crossed in recent days.

Yes, the media are right: oil has never been so expensive in absolute dollars, but what about in relative terms? That is, taking into account the level of inflation and the cost of money. We will see that oil is not that expensive right now, even above $ 50!

Indeed, by taking into account the evolution of the price of the $, the media are seriously mistaken as shown by the following curve on which the price of the barrel was related to the price of the dollar of 1998.

*Click to enlarge. Source: World Energy Committee and British Petroleum*

**In the early 80s, oil was therefore much more expensive than now, since it was, in 1998 dollars, close to $ 70.**

But a second parity correction is necessary in order to put the price at 2004 dollars.

Thus, according to the Ministry of the Economy, Finance and Industry: the average price of the smoothed dollars per year was:

In 1998: 5,89960 Frs for $ 1.

In 2004: $ 1,24333 for € 1.

*ps: for the value of 2004, it seems that the picture of the Ministry of Finance has been reversed since the changeover to the euro. The last 3 years are in $ / € and not € / $ as specified. We have obviously corrected ourselves*

The parity € / frs is fixed at: 6,55957 frs / € according to Boursorama

We spend all these numbers in 2004 $:

$ 1 of 1998 = 5.89960 / 6.55987 € = 0.899 €

Let's simplify the calculations at 1 / 1000 this will be precise enough!

In 1998, it took 1 / 0.899 = 1.11 € to obtain 1 $.

We therefore logically obtain the parity $ (1998) / $ (2004): $ 1 from 1998 = 1.11 * 1.243 = $ 1.38 from 2004.

It is therefore necessary to make a correction of 1.38 (or 38%) of the values in the graph above to obtain the price per barrel in 2004 dollars.

__There comes an oil price, in 2004 dollars, between 1978 and 1981 at more than 60 * 1.38 = $ 82.8 per barrel with a peak in 1980 at 69 * 1.38 = $ 95.22 per barrel !!!__

And so for 3 years the barrel was higher than $ 82! So who said oil is expensive now?

From an ecological point of view, nothing has changed (or almost) at the time with a barrel approaching $ 100.

In the near future nothing will change either as long as the price of fossil energy remains so low and it is as we have just shown. Things will not change in the long term at $ 60 or $ 70 a barrel.

Obviously there is the increase in demand which will gradually change the economic situation in the near future.

In addition, the cost of pollution slowly begins to be taken into account, via carbon scholarships »But again will the environment and the preservation of resources be the big winners?

We can strongly doubt ...

**From the point of view of your purchasing power**

Oil is too expensive, no one will be able to roll soon? **This is false… because oil, compared to purchasing power, ie the minimum wage, has already been much more expensive!**

So in 1980, **it took nearly 15 hours of minimum wage to "afford" a barrel of crude oil, whereas in 2004, it took just under 4 hours! **

Obviously these figures are corrected:

- by inflation

- by monetary parity

Find out more, method and evolution curve for 25 years: Smic, smicard and the price of a barrel of oil

**From an ecological point of view**

Another point that should currently be taken into account in the price of oil: CO2 emissions.

Some experts estimate the (environmental future) cost of a ton of CO2 released at between $ 10 and $ 40. Others speak, but it is undoubtedly abusive, from 80 to 100 $. Consider a reasonable low average of $ 20 a tonne.

A ton of oil burned on average 2.5 times its mass form CO2.

A barrel weighs 127 kg and will therefore reject 320 kg of CO2 approximately.

Hence an “extra cost” per barrel of 0.32 * 20 = $ 6.4. Or more than 10% the current price. So much more on a weak barrel. With the high estimate at $ 100 per tonne, we multiply this figure by 5, ie more than 50% increase and more than 100% increase with a barrel at $ 25.

**From an ecological point of view**

Let us calculate the remaining proven “financial” reserves of oil.

On an ideal basis of 80 million barrels / day at $ 40 for 40 years, at least $ 46 billion remains *without taxes* proven reserves of oil.

At 70% tax this figure rises to about $ 150 billion.

Obviously, this figure is reduced since prices and taxes will tend to rise over the next decades.

The question that comes: who would be ready to do without such a financial windfall?

*ps: I am not an economist or a financier, I just use the tools I have at my disposal. In this sense, any constructive reaction would be welcome. For this use the forum: the barrel of oil at 100 dollars finally!*

**Note to 20 March 2008:** this page is all the more true at present, the barrel having durably passed the symbolic bar of 100 $ while the parity of the dollars is only falling ...

**More:- Taxation and the price of oil: who earns how much?- Money and earnings from crude oil- Senate Report on the price of oil- Smic, smicard and the price of a barrel of oil**