DID YOU KNOW ?

Crude oil prices behave much as any other commodity with wide price swings in times of shortage or oversupply. The crude oil price cycle may extend over several years responding to changes in demand as well as OPEC and non-OPEC supply.
The U.S. petroleum industry's price has been heavily regulated through production or price controls throughout much of the twentieth century. In the post World War II era U.S. oil prices at the wellhead have averaged $20.94 per barrel adjusted for inflation to 2004 dollars. In the absence of price controls the U.S. price would have tracked the world price averaging $22.86. Over the same post war period the median for the domestic and the adjusted world price of crude oil was $17.18 in 2004 prices. That means that only fifty percent of the time from 1947 to 2004 have oil prices exceeded $17.18 per barrel. (See note in box on right.)
Until the March 28, 2000 adoption of the $22-$28 price band for the OPEC basket of crude, oil prices only exceeded $23.00 per barrel in response to war or conflict in the Middle East.

*World Price - The only very long term price series that exists is the U.S. average wellhead or first purchase price of crude. When discussing long-term price behavior this presents a problem since the U.S. imposed price controls on domestic production from late 1973 to January 1981. In order to present a consistent series and also reflect the difference between international prices and U.S. prices we created a world oil price series that was consistent with the U.S. wellhead price adjusting the wellhead price by adding the difference between the refiners acquisition price of imported crude and the refiners average acquisition price of domestic crude.