Saturday, 29 October 2011

Inflation Adjusted Oil Price since 1986 - UK Pounds

From reading this Septembers Inflation report from the Office of National Statistic today, one of the sectors highlighted as a big culprit for that month’s large increase in inflation, were fuel and energy.  I regularly see the historical oil price and have often wondered what the historic price was in UK Pounds or what it was when adjusted for UK inflation.  So I thought I would investigate.   

Using the West Texas Intermediate (WTI) crude oil spot price since 1986, from US Energy Information Administration, ( and using the daily UK £ to US $ exchange rate from the Board of Governors of the Federal Reserve System ( to convert it into Pounds Sterling per barrel.  The affect of UK inflation was adjusted for by using the Retail Prices Index (RPI) all items, from the UK Office of National Statistics for the UK inflation (  The first two chat shows the daily US Dollar to UK Pound exchange rate and the WTI Oil price in US Dollars and UK Pounds.  

Daily West Texas Intermediate crude oil spot price since 1986 in US Dollars and UK pounds
Daily US Dollar to UK Pound Exchange Rate

It can be seen that the oil price has been pretty volatile in recent years, both in US Dollars and Pound Sterling.  Furthermore the US Dollar to UK Pound exchange rate has been fairly volatile since 1986 and varied from 1.4 to 2.2 US $ to a the UK Pound.  When priced in UK Pounds the oil peaked in 2008 at around £68 per barrel and this price was matched again in April 2011.  When the oil priced peaked in Dollars in 2008, it was around $135 per barrel.  This price has not been matched the rally at the beginning of 2011, where it reached around $110 per barrel.  So in the UK oil is very close to the price peak in 2008 and its all down to the falling value of the UK Pound compared to the US Dollar.  Below is the inflation adjusted historical WTI crude oil spot price in Pounds Sterling.
Inflation adjusted historical WTI crude oil spot price in Pounds Sterling since 1986

The dark blue line is the unadjusted daily spot price converted into UK Pound at that day’s exchange rate.  The pink line is the oil price adjusted to account for UK inflation (RPI).  As it can be seen, the present price in Pounds pretty much where it was in mid 2010 and end of 2005.  The end of 2005 was an interesting time in the UK, as it was the second time that the oil refineries where being blockades by lorry drivers (  The other time was in late 2000 when the same thing happened (  The interesting thing to note is that on both of those occasions the oil price in Pounds Sterling was above £50 per barrel.  It looks like the last 26 years of cheap oil in Pounds is well and truly over.

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