Comment 97212

By A Smith (anonymous) | Posted January 26, 2014 at 19:21:33

Since 1950, the price of a barrel oil has remained very stable in price, as measure by gold. In 1950, a barrel of oil cost 2.5 grams of gold. Today, the price is 2.5gms/gold for a barrel of oil.

Average price of ounce of gold in US dollars from 1982-2004 = $350

Current price of gold in US dollars = $1,264

Current price of a barrel of oil = $96.64US

If the Federal Reserve brought back the unofficial gold standard that existed from 1982-2004, the price of oil would fall to $26.76, assuming the 64 year gold/oil ratio remained in place.

According to BMO, production costs for tar sands oil is $50-$90/barrel.

In other words, the primary driver of tar sands investment is a commodity bubble created by cheap credit.

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