Trend of Prices in the Petroleum Industry

The prices of crude petroleum and its derivatives have shown an upward trendfrom 1915 to 1920, and a downward trend from 1920 to 1923, see Table 1. Overthe former period, oil prices were dominated by the rapidly increasing demandsand inflation incident to the war and its aftermath, while over the latterperiod oil prices were influenced at the outset by deflation and then by theconditions of overproduction that have characterized the past three years. Thepurpose of this paper is to analyze the broader features of the more recentprice movements in the petroleum industry and to relate these features to basiceconomic conditions in the industry. Index Numbers of Oil Prices The analysis and comparison of price movements may be facilitated byconverting actual prices into relative prices, or index numbers, with 1913 taken as a base of 100. In this way, the various price groups are expressed aspercentages of the 1913 prices and may thus be readily compared with oneanother or with the average prices of other commodities similarlyexpressed. Table 1 gives the index numbers representing the average prices of crudepetroleum, gasoline, kerosene, fuel oil, lubricating oils, and all commodities.The last named is the index of all commodities as published by the U. S. Bureauof Labor Statistics and is widely accepted as the official measure of thegeneral price level. The index numbers of oil prices were calculated by thewriter from weekly quotations published in trade journals. Fig. 1 shows in graphic form the trend of oil prices by months over theperiod 1920–23. AIME 070–65