Crude still has further to fall

West Texas Crude has been falling since breaking support at $75/barrel, following through below $50/barrel. A test of 2009 lows at $30/barrel is likely unless there is major disruption to supply.

WTI Crude Monthly

When we adjust crude prices for inflation, they remain high by historical standards. Prior to the China boom of the early 2000s, the ratio of WTI Crude to CPI had seldom ventured above $20/barrel when measured in 1982-1984 dollars (shown as 0.2 on the chart below). After the dramatic fall of the last 3 months, the adjusted price at the end of December 2014 (in 1982-1984 dollars) is still $25.20/barrel (0.252 on the chart) — well above the former high.

WTI Crude adjusted for inflation

2 Replies to “Crude still has further to fall”

  1. I would never expect to hold in 2015, an inflation adjusted 1982 price for any commodity ,
    Simply put growth in population numbers and growth in living standards and consumption

    1. Adjustment to 1982 prices is simply because that is the base year for the consumer price index (CPI=100). Take a look at the spike in prices in 2003/2004. This was clearly not due to growth in population numbers and growth in living standards, but increased demand from China.

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