Oil and the Model T

Henry Ford’s Model T was in production for roughly 20 years, from 1908 to 1927. Using 1920 as the midpoint of this production cycle, we find that oil sold for about 3.50 per barrel, which adjusts to 34.00 in today’s dollars.

http://www.writedesignonline.com/history-culture/modelT.jpg

Oil prices were just as volatile in the first half of the 20th C. as they’ve become now, with a number of price collapses coming when new discoveries were made. Notable among these was the emergence of the Black Giant field in east Texas in 1930. This discovery kicked off the golden age of global oil exploration and discovery, and the bulk of the oil the world would find charged ahead from 1930 and peaked in the early 1960’s. Since that time, the world has continued to find new oil every year. But, all the discoveries are much smaller in size.

http://www.energybulletin.net/image/primer/growing_gap.png

The world seems to be learning two things at once, in the midst of yet another collapse of the US auto industry. First, automobiles are a hangover technology from the 20th Century which forms not only the industrial base of many nations, but, is a huge source of demand for steel, rubber, and other base metals. To the extent this technology’s future is in question as a growth product then we have to wonder what will form the base of global industrialism. My answer is trains.

Second, the price signal given to the world from oil since 2002, in a context of flat global oil production, more than strongly indicates that oil at 45.00 dollars a barrel is not even remotely close to a sustainable price–unless a collapse in global industrialism maintains for some time to come.

Thus we arrive pretty easily at a conclusion many now suspect: growth and cheap oil are incompatible. And in 2008, oil at a nominal price of 45.00 dollars actually represents an inflation-adjusted price that is higher, but is not dramatically higher from some of the prices seen before World War II.

-Gregor

  • http://www.collierclan.net/mark/ Mark Collier

    Another brilliant post.

    Special thanks to twitter, @howardlindzon soren & stocktwits for making it possible to find a great energy mind & writer out of the chaos that is the internet.

    @sparkycollier

  • http://www.collierclan.net/mark/ Mark Collier

    Another brilliant post.

    Special thanks to twitter, @howardlindzon soren & stocktwits for making it possible to find a great energy mind & writer out of the chaos that is the internet.

    @sparkycollier

  • http://www.collierclan.net/mark/ Mark Collier

    Another brilliant post.

    Special thanks to twitter, @howardlindzon soren & stocktwits for making it possible to find a great energy mind & writer out of the chaos that is the internet.

    @sparkycollier

  • dsonnen

    Brilliant insight. I wonder how the inevitable shift from automobile-based economies to mobility-based economies will happen. As oil becomes less viable, how will mobility/transport evolve?

  • dsonnen

    Brilliant insight. I wonder how the inevitable shift from automobile-based economies to mobility-based economies will happen. As oil becomes less viable, how will mobility/transport evolve?

  • dsonnen

    Brilliant insight. I wonder how the inevitable shift from automobile-based economies to mobility-based economies will happen. As oil becomes less viable, how will mobility/transport evolve?

  • http://elliottng.com elliottng

    Great post, as always. Historical perspective and Model T oil at $34 (in current $) helps put the current pricing in perspective. Dangerously low and a vote of no-confidence on our current growth prospects.

  • http://elliottng.com elliottng

    Great post, as always. Historical perspective and Model T oil at $34 (in current $) helps put the current pricing in perspective. Dangerously low and a vote of no-confidence on our current growth prospects.

  • http://elliottng.com elliottng

    Great post, as always. Historical perspective and Model T oil at $34 (in current $) helps put the current pricing in perspective. Dangerously low and a vote of no-confidence on our current growth prospects.

  • Robert Dobb

    all those years Ford was producing the Model T,? gold was traded at fixed prices. and ever since 1971, gold was out and competitive currency devaluations were in. with a little,( (ok, make that alot), speculation thrown in, oil prices adjust to this fact.

    Gregor, good choice of a comparison and photo here.

    the Model T. no heater, let along AC. ride slightly more comfortable than a donkey. arm busting hand crank starting system. refueling gas stations measured by states instead of blocks. suspension comparable to a 1930's tank. steering and braking systems that truly sucked. 100% cotton reinforced tread tires, with a full 300 mile guarantee.

    yup. thanks for pointing out a pretty easy conclusion, that technology has come along way.

    digging techniques for goo, gas, and energy liquids included.

  • Robert Dobb

    all those years Ford was producing the Model T,? gold was traded at fixed prices. and ever since 1971, gold was out and competitive currency devaluations were in. with a little,( (ok, make that alot), speculation thrown in, oil prices adjust to this fact.

    Gregor, good choice of a comparison and photo here.

    the Model T. no heater, let along AC. ride slightly more comfortable than a donkey. arm busting hand crank starting system. refueling gas stations measured by states instead of blocks. suspension comparable to a 1930's tank. steering and braking systems that truly sucked. 100% cotton reinforced tread tires, with a full 300 mile guarantee.

    yup. thanks for pointing out a pretty easy conclusion, that technology has come along way.

    digging techniques for goo, gas, and energy liquids included.

  • Robert Dobb

    all those years Ford was producing the Model T,? gold was traded at fixed prices. and ever since 1971, gold was out and competitive currency devaluations were in. with a little,( (ok, make that alot), speculation thrown in, oil prices adjust to this fact.

    Gregor, good choice of a comparison and photo here.

    the Model T. no heater, let along AC. ride slightly more comfortable than a donkey. arm busting hand crank starting system. refueling gas stations measured by states instead of blocks. suspension comparable to a 1930's tank. steering and braking systems that truly sucked. 100% cotton reinforced tread tires, with a full 300 mile guarantee.

    yup. thanks for pointing out a pretty easy conclusion, that technology has come along way.

    digging techniques for goo, gas, and energy liquids included.

  • gregor.us

    My advice to business and government is to plan for 200 dollar oil on the next move higher. I would also plan on annual averages never going below 80.00 again. The 2008 average will work out to be around 100.00. I tip 2009 to average about 85.00.

    Cheers,

    Gregor

  • gregor.us

    My advice to business and government is to plan for 200 dollar oil on the next move higher. I would also plan on annual averages never going below 80.00 again. The 2008 average will work out to be around 100.00. I tip 2009 to average about 85.00.

    Cheers,

    Gregor

  • gregor.us

    My advice to business and government is to plan for 200 dollar oil on the next move higher. I would also plan on annual averages never going below 80.00 again. The 2008 average will work out to be around 100.00. I tip 2009 to average about 85.00.

    Cheers,

    Gregor

  • gregor.us

    It would be enormously helpful if the Obama team were to choose commuter rail and light rail as first lines of attack. They need to act not for 50 dollar oil but for 150 dollar oil.

    G

  • gregor.us

    It would be enormously helpful if the Obama team were to choose commuter rail and light rail as first lines of attack. They need to act not for 50 dollar oil but for 150 dollar oil.

    G

  • gregor.us

    It would be enormously helpful if the Obama team were to choose commuter rail and light rail as first lines of attack. They need to act not for 50 dollar oil but for 150 dollar oil.

    G

  • gregor.us

    That's very nice of you to say. I appreciate it.

    G

  • gregor.us

    That's very nice of you to say. I appreciate it.

    G

  • gregor.us

    That's very nice of you to say. I appreciate it.

    G

  • Noel Chaney

    Nice to read some positive ideas.

    I've believed for a long time that we will be on our way to the other side of this crisis when the US starts an intercity rail project on the same level as the interstate Hwy projects of the 50s and 60s. That and nuclear power are the future, IMO. Cars will be mostly gone in two generations and that is hard for me because I really like cars, LOL.

  • Noel Chaney

    Nice to read some positive ideas.

    I've believed for a long time that we will be on our way to the other side of this crisis when the US starts an intercity rail project on the same level as the interstate Hwy projects of the 50s and 60s. That and nuclear power are the future, IMO. Cars will be mostly gone in two generations and that is hard for me because I really like cars, LOL.

  • Noel Chaney

    Nice to read some positive ideas.

    I've believed for a long time that we will be on our way to the other side of this crisis when the US starts an intercity rail project on the same level as the interstate Hwy projects of the 50s and 60s. That and nuclear power are the future, IMO. Cars will be mostly gone in two generations and that is hard for me because I really like cars, LOL.

  • gregor.us

    I like cars too. But, I also love trains. And of course, alot of these United States cannot be served by trains. We'll still need to use fossil fuels in the farm states and the great plains especially.

    In a post previously this week, I also advised that Obama use emergency powers to get more commuter and light rail put in. I also suggested the most target rich cities…like Miami, Seattle, and probably LA or SF Bay areas.

    G

  • gregor.us

    I like cars too. But, I also love trains. And of course, alot of these United States cannot be served by trains. We'll still need to use fossil fuels in the farm states and the great plains especially.

    In a post previously this week, I also advised that Obama use emergency powers to get more commuter and light rail put in. I also suggested the most target rich cities…like Miami, Seattle, and probably LA or SF Bay areas.

    G

  • gregor.us

    I like cars too. But, I also love trains. And of course, alot of these United States cannot be served by trains. We'll still need to use fossil fuels in the farm states and the great plains especially.

    In a post previously this week, I also advised that Obama use emergency powers to get more commuter and light rail put in. I also suggested the most target rich cities…like Miami, Seattle, and probably LA or SF Bay areas.

    G

  • bobsagetfanatic

    Hate to bring up something as tacky as common stock, but is a double bottom in for Bombardier?
    http://finance.yahoo.com/echarts?s=BBD-A.TO#cha

  • bobsagetfanatic

    Hate to bring up something as tacky as common stock, but is a double bottom in for Bombardier?
    http://finance.yahoo.com/echarts?s=BBD-A.TO#cha

  • bobsagetfanatic

    Hate to bring up something as tacky as common stock, but is a double bottom in for Bombardier?
    http://finance.yahoo.com/echarts?s=BBD-A.TO#cha

  • http://www.faithmight.com/blog Lydia

    Great article! Totally in agreement about light rails and train system. Why the US is so far gone in public transporation that is EFFICIENT and comparable to the train/light rail systems in Europe and Japan is beyond me. Which brings another thought: Why hasn't Amtrak been more vocal in infrastructure investment? Or have they?
    Thanks, Gregor!

  • http://www.faithmight.com/blog Lydia

    Great article! Totally in agreement about light rails and train system. Why the US is so far gone in public transporation that is EFFICIENT and comparable to the train/light rail systems in Europe and Japan is beyond me. Which brings another thought: Why hasn't Amtrak been more vocal in infrastructure investment? Or have they?
    Thanks, Gregor!

  • http://www.faithmight.com/blog Lydia

    Great article! Totally in agreement about light rails and train system. Why the US is so far gone in public transporation that is EFFICIENT and comparable to the train/light rail systems in Europe and Japan is beyond me. Which brings another thought: Why hasn't Amtrak been more vocal in infrastructure investment? Or have they?
    Thanks, Gregor!

  • BrianSJ

    Just found you today (H/T Alphaville)
    a) Checking you did know that the Model T was to have hemp panels and be powered by bio-diesel as “the farmers' car” – till the good old boys went to see Henry.
    b) My reading of Toyota (the only sensible people in the auto industry) – from the outside – is that future mobility will stil be largely personal but robotic; they seem to me to be becoming a robotics company. Studies in the UK have indicated (dreadful statement but as much as I can remember) that for many train lines we would be better ripping up the track and running buses.

  • BrianSJ

    Just found you today (H/T Alphaville)
    a) Checking you did know that the Model T was to have hemp panels and be powered by bio-diesel as “the farmers' car” – till the good old boys went to see Henry.
    b) My reading of Toyota (the only sensible people in the auto industry) – from the outside – is that future mobility will stil be largely personal but robotic; they seem to me to be becoming a robotics company. Studies in the UK have indicated (dreadful statement but as much as I can remember) that for many train lines we would be better ripping up the track and running buses.

  • BrianSJ

    Just found you today (H/T Alphaville)
    a) Checking you did know that the Model T was to have hemp panels and be powered by bio-diesel as “the farmers' car” – till the good old boys went to see Henry.
    b) My reading of Toyota (the only sensible people in the auto industry) – from the outside – is that future mobility will stil be largely personal but robotic; they seem to me to be becoming a robotics company. Studies in the UK have indicated (dreadful statement but as much as I can remember) that for many train lines we would be better ripping up the track and running buses.

  • BigArm25

    I think the additional real obvious conclusion is that global economic growth and EXTREME HIGH OIL PRICES are incompatible. The global economic recessions of extreme oil price environments in 1973, 1981, 1991 and 2009

  • BigArm25

    I think the additional real obvious conclusion is that global economic growth and EXTREME HIGH OIL PRICES are incompatible. The global economic recessions of extreme oil price environments in 1973, 1981, 1991 and 2009

  • BigArm25

    I think the additional real obvious conclusion is that global economic growth and EXTREME HIGH OIL PRICES are incompatible. The global economic recessions of extreme oil price environments in 1973, 1981, 1991 and 2009

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