1. Paper presented in New Orleans at AAPG National Convention.
Best Paper Award – Energy Minerals Division, 2000
AAPG Bulletin, V. 84 (2000), No. 13 (Supplement)
AAPG ANNUAL MEETING ABSTRACT
New Orleans, Louisiana
April 16-19, 2000
William DeMis1
(1) Marathon Oil Co, Midland, TX
Abstract: Historical analysis of real global price of oil: Implications for future
prices
Traditional analyses of oil prices show a "constant price" corrected using the U.S.
consumer Price Index. The Real Global Price of oil is the price corrected for
inflation and for fluctuations in the U.S. dollar´s value relative to a weighted
basket of currencies. The Real Global Price of oil is a more accurate measure of
oil´s value on global markets over the past 30 years.
Since the U.S. abandoned the Bretton Woods agreement in 1971, the value of
the U.S. dollar has varied sharply on global markets; gaining or losing as much
as 35%. OPEC countries obtain 80-90% of their revenue from oil sales that are
priced in U.S. dollars. Changes in the U.S. dollar´s value can affect OPEC´s
purchasing power, almost as much as changes in nominal prices.
When the value of the U.S. dollar drops and the Real Global Price falls, as
happened in 1973, 1979, and 1995, OPEC has reacted with supply cuts, price
increases, and/or calls to abandon the U.S. dollar as the basis for pricing oil. In
June, 1995, the U.S. dollar sank to all-time lows. OPEC ministers openly called
for abandoning the U.S. dollar. Oil price increases followed. Recent oil price lows
of 1997-98 were not sustainable because the Real Global Price of oil fell below

2. the previous all-time low set in 1973. OPEC countries are now dependent on oil
revenues to fund large social programs and a growing middle class - expenses
that did not exist in 1973. (The opinions herein are solely the author's and do not
reflect Marathon Oil Company's opinions).
©Copyright 2000. The American Association of Petroleum Geologists. All Rights
Reserved