Monday, October 17, 2011
Pursuant to Friday's decision to use Brent prices henceforth, I wanted to take the standard graphs of oil supply that I post each month - at least the ones that incorporate price information - and post versions of them with each price series to better understand the shift that I am making. Above is the graph of production since 2002 with inflation-adjusted Brent prices on the right hand scale and below is the same thing with WTI prices:
As you can see, the main difference is that the price peak associated with the Arab Spring is bigger in Brent terms, and has not fallen as far since. This reflects the widening WTI-Brent spread over the last 12 months.
Similarly, here is the new Brent-based price production scatter-plot:
And here is the old one based on WTI:
Again, the big difference is that the 2010-2011 price spike looks more like the 2005-2008 one when viewed in Brent terms.
Henceforth, I will be using only the Brent-based ones.