Just how cheap is oil these days?
Not only does a standard steel drum barrel cost more than three times the 42 gallons of crude that could go in it, the actual lid now costs more too.
“Yeah, that’s interesting – and cute too,” said Avery Shenfeld, chief economist at CIBC World Markets, with a chuckle.
In fact lots of everyday items from pizza to Levi’s to a two-four cost more than ‘black gold’ these days thanks to the tanking Brent crude price, which dipped below $28 U.S. a barrel in London Monday.
Oil traded near 12-year lows after the lifting of international sanctions on Iran paved the way for increased supply amid a global glut, Bloomberg News reports.
Iran is beginning efforts to boost output and exports by 500,000 barrels a day now that restrictions have ended, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sunday.
“Clearly, what is happening is that markets are continuing to be quite anxious about the possibility that we will see Iran bring back quite a bit of oil,” said Bart Melek, the head of commodity strategy at TD Securities in Toronto. “This probably is a little quicker than people thought.”
Iran, which was OPEC’s second-biggest producer before sanctions were intensified in 2012, is trying to regain its lost market share and doesn’t intend to pressure prices, officials from its petroleum ministry and national oil company said this month.
Shenfeld said that prices for raw materials are much more volatile than manufactured items, so when a commodity plunges the way oil has over the last year, the effect is far more pronounced. It’s lost 21 per cent of its value this month alone.
“Oil has fallen a long way, so it makes sense” that it can now be compared to restaurant food and clothing, he said.
The veteran economist noted the price per barrel of crude was roughly comparable to everyday items in the 80s too.
(The steel drum that is frequently seen to depict an oil barrel is actually a 55 gallon container, but it’s not what is used to transport and deliver oil. Most is transported by pipeline or tanker. Today, a barrel of oil is simply a measurement – not a description of a container.)
Meanwhile gold is rebounding this year as China’s economic slowdown triggered global market turmoil and sparked demand for haven assets.
The old adage that an ounce of gold is roughly equal to the price of a nice men’s suit holds true if you shop at Harry Rosen and favour Hugo Boss. Bullion is hovering just under $1,100 U.S. an ounce.
Meanwhile current comparisons to the price of oil at $28 U.S. a barrel (or about $40.76 Canadian) can be found just about everywhere. Here are some examples before tax.
Standard 55-gallon steel drum: $99 U.S.
Separate lid from Bubba’s Barrels in Knoxville, Tenn.: $39.91 U.S.
Two party pepperoni pizzas from Pizza Nova: $41.58
Ahi tuna tartar at Harbour Sixty: $44
10-oz filet mignon at The Keg: $44
Three-foot catered sub from Subway: $49.99
4000 ml bag-in-box of Jackson-Triggs Merlot: $42.95
24 bottles of Heineken: $47.95
Men’s 501 Levi’s at The Bay: $59.99