Forty years ago on July 20, 1969, a man walked on the moon, a milestone on a variety of fronts. At the time, the posted oil price of West Texas Intermediate crude oil was $3.35/barrel. Pegged to a generally accepted rate of inflation since then, it would be somewhere under $20/b in today's dollars.
In 1969, OPEC set the oil prices pegged to a dollar which was still on the gold standard. Also in 1969, the last of the great trans-Atlantic ocean liners, the Queen Elizabeth 2, made its first voyage, which was coincidentally the same year that the Concorde made its maiden flight and Boeing delivered the first 747 commercial airplane to Pan Am. The former marked an end of an era and the latter two were harbingers of the shift in travel, and the boom in jet fuel to come.
The world's major suppliers had been set for several decades after some shifting in the late 1940s, and the major consumers were for the most part the same players who dominated during the Industrial Revolution.
Low sulfur diesel fuels were still a gleam in many eyes, as studies of particulate emissions and nitrogen oxides, which they were designed to reduce, were still in their infancies. Low sulfur diesels would not be introduced into the US until the early 1990s and to many OECD countries until the mid to late 1990s. Today there are numerous permutations and grades, including on and off road, ultra low sulfur diesel.
On this Monday, July 20, 2009, the spot WTI price is $63.98 and the world it exists in has many different norms than 40 years ago. Today the market sets the price, although the OPEC cartel remains influential.
While oil is still pegged to the dollar, the greenback has been off the gold standard since 1971 and it has arguably lost its position as the figurative "gold standard" currency. Today, the dollar tracks about 40% below the Euro, a currency that did not exist in 1971 for an economic and political union that did not exist until 1993.
The late sixties' spot oil price would not move with any significance until the end of 1973 through 1974 during the Arab Oil embargo. Today, no one expects such runs of price stability and the industry is still recovering from the most dramatic yearly price change ever, as the current spot price is well over 60% off its high of just over $147/b for WTI of just a year ago, yet up almost 100% from its low of $33 earlier in the year.
It may be impossible to say which of today's modes of transportation are on the way out, as the QEII was in 1969, and which of today's products are the 747s of a new era. Equally difficult to say is at what point, if ever, will refineries now optimized to make as much jet fuel and low sulfur gases become obsolete or lose their competitive edge.
World oil demand has increased since 1969 and the sourcing is now much more global. The major consumers have shifted significantly too. Perhaps most significantly, China became a net importer in of oil in 1994 and of natural gas in 2008.
Like getting a man on the moon, the future landscape of oil will reflect an impossible-to-predict world and may require equipment and technology not built today, and possibly not even designed or imagined.
While not as novel as space travel, commercial oil is essentially still a very young industry, arguably just 150 years old. In fact, it has its own milestone anniversary coming up.
While the August 27, 1859, discovery of the Drake well in Pennsylvania was not the "moon landing" of its day, certainly it was something that was the product of a dream -- a commercially successful oil well -- albeit a dream motivated by profit more than glory. It has had its own far reaching and unpredictable-at-the-time consequences, and is facing its own unknown and unknowable future.
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