Abstract
There has been much talk of late about the “high” price of oil. Many factors are mentioned as causing the recent price rise: turmoil in Iraq, Nigeria and Venezuela, increased demand from China, and speculative trading in oil futures. Yet “high” is usually understood in historical terms; all we know is that the price is higher than it used to be. But could one figure out whether oil is expensive or cheap in absolute terms? And if so, how to calculate the “real” price of oil at any given point in time? The concept of “replacement value”, taken from the field of environmental economics, can help answer this question. Josef Shaoul comments.
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