Oil Wager: One year to go

Posted on December 17, 2014 by Steve

With fewer than twelve months to go before the wager matures, a sudden and dramatic crash in oil prices has me hopeful of a win.

A barrel of oil now has approximately the same price, inflation adjusted, as it did nine years ago, when it was $58.75. The Big Mac has appreciated relative to inflation, so the bundle of 19.2 burgers is now worth about 65% more than the oil barrel.

During the last spectacular oil crash in 2008, the price dropped by about three-quarters in six months, from $143.57 on 2 July 2008 to $33.87 on 19 December 2008. This time the price dropped by half in the same time, going from $107.26 on 20 June 2014 to $55.91 on 15 December 2014.

But a year is a lot of time for a recovery. By mid-December 2009 the price had risen to the mid-70s, above the burger index at that time.