New York Paper - Trend of Prices in the Petroleum Industry (with Discussion)

The prices of crude petroleum and its derivatives have shown an upward trend from 1915 to 1920, and a downward trend from 19'20 to 1923, see Table 1. Over the former period, oil prices were dominated by the rapidly increasing demands and inflation incident to the war and its aftermath, while over the latter period oil prices were influenced at the outset by deflation and then by the conditions of overproduction that have characterized the past three years. he purpose of this paper is to analyze the broader features of the more recent price movements in the petroleum industry and to relate these features to basic economic conditions in the industry. Index Numbers of Oil Prices The analysis and comparison of price movements may be facilitated by converting 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 as percentages of the 1913 prices and may thus be readily compared with one another or with the average prices of other commodities similarly expressed. Table 1 gives the index numbers representing the average prices of crude petroleum, gasoline, kerosene, fuel oil, lubricating oils, and all commodities. The last named is the index of all commodities as published by the U. S. Bureau of Labor Statistics and is widely accepted as the official measure of the general price level. The index numbers of oil prices were calculated by the writer from weekly quotations published in trade journals. Fig. 1 shows in graphic form the trend of oil prices by months over the period 1920-23. It may be observed that the prices of crude oil and its derivatives move in rough conformity with one another; tend to follow