Based on historical gold-oil ratios, oil appears extraordinarily cheap right now.
One way to establish if a commodity or asset is relatively expensive or inexpensive is to price it in something other than a fiat currency--for example, gold. Gold goes up and down in value relative to other commodities and fiat currencies, so it is itself a volatile yardstick. Nonetheless, it provides a useful measure of the relative value of gold and whatever is being measured in gold--in this case, oil.
(note that oil traded above $100/brl earlier in 2011, but at gold's peak was around $90/brl)
Here is a chart of oil (WTIC) from 2012 to the present:
And here is a chart of the gold-oil ratio from 2012 to the present:
While the gold-oil ratio exceeded 25 three decades ago, in the era of rising demand from the emerging markets of China, India and other nations, the ratio has only touched 20 when gold was trading above $1,800/ounce.
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Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube)
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