Oil Is Going To $300 A Barrel
Twitter Post By Jamie McIntyre
The thing about commodities like oil is that while they can be acutely volatile because of supply and demand and political events, long term their price is a function of the technology needed to create them and the state of inflation in the denominating economy. As a baseline commodity prices go up in line with inflation. So in a country with high inflation commodities become currency and as any gold fan will tell you, dollars are priced in ounces of gold, not the other way around.
Oil can be seen as a good example of this idea. Dollars are priced in barrels of oil, not the other way around. You can also say that implicit in the whole definition of a commodity is that it is something fungible with money.
It is an interesting metaphor because since 2005 there has been a lot of U.S. inflation. So right now, $1 back in 2005 is worth $1.57 in 2023. You need 57% more money to buy you the same stuff in 2023 than you did in 2005.