HGS February General Lunch

Monetary Pivot Points in the History of the US Dollar, Their Effects on Oil Prices, and the Current Monetary Pivot

Speaker: Bill DeMis

 Wednesday, February 18, 2026

11:30 am – 1 pm

Total Energies (1201 Louisiana St, Houston, TX 77002)

Directions: Security pre-registration is required - attendees will receive a link to security video one day in advance.  Street parking, paid garage parking, and valet are available. 

Cost: $30 Members, $35 Non-members, $25 Students

PLEASE REGISTER EARLY DUE TO SECURITY AT TOTAL

REFISTRATION CLOSES ON MONDAY FEBRUARY 16, 2026 

Abstract

After supply and demand, the single most important control on global oil prices is the value of the US dollar (e.g., DeMis, 1996, 2000, 2021). When oil price behavior, and the desires of the people who set the price of oil, are viewed through an historical retrospective that focuses on monetary pivot points, “geopolitical events” play a surprisingly insignificant role and there is no evidence that oil price rises cause inflation.

Three major pivot points in the value of the US dollar have affected oil prices. These pivot points occurred in 1944, 1971, and 1985. Today’s unsustainable monetary and fiscal excesses of the US government show the US is now in a monetary pivot at least as profound as the collapse of the Bretton Woods Accord.

The Bretton Woods Accord in 1944 was the major monetary pivot point of the 20th century. The agreement pegged the US dollar to gold and made the US dollar exchangeable for gold for foreign central banks. The Bretton Woods Accord made the US dollar the reserve currency of the world.

The second monetary pivot point was the abandonment of the Bretton Woods Accord on August 15, 1971. Bretton Woods demise was caused by the US Federal Reserve printing too many greenbacks to fund the war in Vietnam and President Johnson’s Great Society programs.  Quitting Bretton Woods led to a 21% devaluation in the dollar in 18 months (DeMis, 2000). Oil supply and demand were tight, therefore international oil producers made up for the cumulative effects of 8 years of inflation and back-to-back dollar devaluations by increasing nominal oil prices four-fold in four years starting in 1973 (ibid, 2021).

The “oil prices shocks” of the 1970s were completely foreseeable as an adjustment to depreciations in the dollar after the collapse of Bretton Woods. But oil price rises could only occur after three conditions were met: 1) the price of gold rose three-fold to $100/oz; 2) there was orgy of Federal Reserve money-printing and government deficit spending; 3) oil supply became tight (DeMis, 2021).

The third pivot point was the Plaza Accord in 1985 where the signature countries agreed to devalue the dollar to cure trade imbalances (DeMis, 2019). The greenback fell 35% in seven years. International oil producers took extreme cuts in purchasing power but could not offset losses by increasing their nominal prices because of over-supply from the North Slope and North Sea (DeMis, 2016).

By the early 2000s, supply and demand came back into balance. Major producers were able to raise oil prices to regain purchasing power lost from the third pivot point. Nominal oil prices increased fourfold in four years (2004-2008). Tellingly, the only news headline about surging oil prices and inflation were to ask, “Where is the inflation?” Certainly by 2008 the US had de-industrialized its economy and was consuming less oil per unit of Gross Domestic Product. But not even this change explains the lack of inflation in the face of a four-fold rise in oil prices. The dominant explanation is that the money supply was not growing faster than the economy (DeMis, 2021).

The shale revolution brought on the equivalent of a “Saudia Arabia” of oil production and a “Saudi Arabia” of gas production in the US. Changes in value of the US dollar have been essentially meaningless to OPEC (DeMis, 2023).

Today, US debt to GDP is 120%, as high as at the end of World War II. The US recovered financially after WW II by growing GDP and inflating the debt away (DeMis, 2023). By 1962, the economy grew by 75% in real terms (meaning corrected for inflation) and cumulatively inflation was by 45% by 1957. Today, the US has both a massive trade deficit and an aging population which makes it impossible to grow the US GDP like after WW II.

Another monetary pivot point is now upon us. Interest payments on the US debt are $1.1 trillion per year, greater than the entire US miliary budget. More ominously, two-thirds of US debt is short-term and it will need be re-financed within the next two to four years, most likely at higher rates. Meantime, the US continues to deficit spend at an annual rate of $1.8 trillion per year, thereby further increasing the debt load and the interest payments. The only condition left is for supply-demand to become tight before oil prices surge like they did in the 1970s.

Financial pundits are speculating about a hypothetical “Mar-a-Lago Accord” wherein the US will swap US treasury and bond debt for a new, no-yield, ultra-long-term bond. This is a sovereign default in all but name. Other pundits suggest a major devaluation of the dollar.   Whatever the solution to the current deficit and monetary crisis, changes will have to be dramatic and will not be pleasant.

Today, cumulative inflationary pressures suggest oil prices need to be about $250/bbl for international producers to regain their purchasing power parity - if they continue to use the US dollars. Oil’s revaluation to a higher price will probably occur when supply becomes tight, but might be precipitated solely by the current monetary pivot point if this pivot becomes extreme enough.

References

DeMis, W. D., 1996, History of US dollar exchange rates and the real value of oil: American Association of Petroleum Geologists Bulletin, v. 80, p. A35–A36; AAPG Search and Discovery Article #91019

DeMis, W. D., 2000, Historical analysis of real global price of oil: Implications for future prices: American Association of Petroleum Geologists; AAPG Search and Discovery Articles #90914 and #70037.

DeMis, W.D., 2016, Real Global Price of oil in the unconventional era: American Association of Petroleum Geologists Search and Discovery Article #90266, AAPG Pacific Section and Rocky Mountain Section Joint Meeting, Las Vegas, Nevada, October 2-5, 2016

DeMis, W. D., 2019, Historical analysis of the real global price of oil: Houston Geological Society Bulletin, v. 61, no. 7, pg. 51–63.

DeMis, W. D., 2021, History suggests nominal oil prices could rise to $200 a barrel in near future: American Association of Petroleum Geologists/Society of Economic Geophysicists IMAGE Convention Abstract (Author’s note: AAPG has not yet posted this abstract to its Search and Discovery website, making proper citation impossible at present.)

DeMis, W., 2023, The Coming Commodity Super Cycle: GeoGulf Transactions, v. 72, p. 37–79, AAPG Search and Discovery Article #11375

Bio:

William (Bill) DeMis

William (Bill) DeMis is the President of Rochelle Court, LLC, an oil-and-gas consultancy located in Cyprus, Texas. He is an angel investor in a major domestic start-up company that is drilling some deep and potentially significant wildcats for natural gas in the onshore Gulf Coast. Bill likes to look at outside prospects and he generates his own prospects for fun and, rarely, for profit.  

Bill has been employed as a work-a-day prospecting geologist for most of his 35 years, but he has also held management positions including: Exploration Manager at Marathon Oil, Exploration Vice President at Roxanna Oil, and Senior Vice President and Chief Geologist at Goldman Sachs.

Bill has received two Best Paper Awards from the AAPG for his analysis of the effects of US dollar exchange-rate variations on the value of oil on global markets, in 1996 and 2000.  This talk on Monetary Pivot Points is an outgrowth of that work from the 1990s. Bill also won “best paper” awards from Rocky Mountain Associations of Geologists and from the GCAGS.

Bill is an associate trustee of the AAPG foundation. He currently serves as the Foreman of the AAPG House of Delegates and is on the Board of Directors of the Houston Geological Society.