Price of petroleum

This article is about the price of crude oil; see gasoline usage and pricing for information about derivative fuels.

      References to the price of petroleum are usually references to the spot price of either WTI/Light Crude as traded on the New York Mercantile Exchange (NYMEX) for delivery in Cushing, Oklahoma or the price of Brent as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange has been incorporated) for delivery at Sullom Voe. The price of a barrel (which is 42 US gallons or approximately 159 litres) of oil is highly dependent on both its grade (which is determined by factors such as its specific gravity or API and its sulphur content) and location. The vast majority of oil will not be traded on an exchange but on an over-the-counter basis, typically with reference to a marker crude oil grade that is typically quoted via pricing agencies such as Argus Media Ltd and Platts. For example in Europe a particular grade of oil, say Fulmar, might be sold at a price of "Brent plus US$0.25/barrel"^{[citation needed]}, or as an intra-company transaction. IPE claim that 65% of traded oil is priced off their Brent benchmarks^{[citation needed]}. Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration (EIA) uses the Imported Refiner Acquisition Cost, the weighted average cost of all oil imported into the US as their "world oil price".

The demand for oil is highly dependent on global macroeconomic conditions, so this is also an important determinant of price. Some economists claim that high oil prices have a large negative impact on the global growth. This means that the relationship between the oil price and global growth is not particularly stable although a high oil price is often thought of as being a late cycle phenomenon.^{[citation needed]}

OPEC, consisting of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela, was formed to maintain the price of oil at a level most beneficial to its membership considered as a whole, and is considered to be a cartel by most observers^{[citation needed]}.

Additional recommended knowledge

What is the Correct Way to Check Repeatability in Balances?

Safe Weighing Range Ensures Accurate Results

What is the Sensitivity of my Balance?

History

Main articles: 1967 Oil Embargo, 1973 oil crisis, 1979 energy crisis, 1980's Oil Glut, and Oil price increase of 1990

Recent price history

Main article: Oil price increases since 2003

A recent low point was reached in January 1999 ($11 per barrel), after increased oil production from Iraq coincided with the Asian financial crisis, which reduced demand. The prices then rapidly increased, more than doubling by September 2000 (35 dollars per barrel), then fell until the end of 2001 before steadily increasing, reaching US $40 to US $50 per barrel by September 2004. ^[1] In October 2004, light crude futures contracts on the NYMEX for November delivery exceeded US $53 per barrel and for December delivery exceeded US $55 per barrel. Crude oil prices surged to a record high above $60 a barrel in June 2005, sustaining a rally built on strong demand for gasoline and diesel and on concerns about refiners' ability to keep up. This trend continued into early August 2005, as NYMEX crude oil futures contracts surged past the $65 mark as consumers kept up the demand for gasoline despite its high price. Crude oil futures peaked at a close of over $77 a barrel in July 2006, and in December 2006 at about $63. That is just about where they began the year 2006.^[2]

On August 1, 2007, US crude reached a new intraday high of $78.77 a barrel after the Energy Information Administration announced that oil stocks in the US were below market expectations and refinery output had increased.^[3] Following further reflection the price later slid backwards.^[4]

On September 14, 2007, US crude (WTI) reached a new intraday high of $80.36 a barrel. Multiple factors have caused this high price. OPEC announced an output increase lesser than expected.^[5] US stocks fall lower than experts predicted^[6] and six pipelines were attacked by a leftist group in Mexico. ^[7]

On October 16, 2007, US light sweet crude rose to a new record of $87.97 on the news that non-OPEC oil producers were expected to reduce daily output by approximately 110,000 barrels.^[8]

On October 19, 2007, US light crude rose to $90.02 per barrel due to a combination of ongoing tensions in eastern Turkey and the reducing strength of the US dollar.^[9] Prices fell briefly on the expectation of increased US crude oil stocks, however they rose again rapidly to a peak of $92.22 on October 26, 2007 when stocks were revealed to have instead fallen.^[10] This was repeated on October 31, 2007, when an expected 100,000 barrel rise in US crude oil stockpiles turned out to be a 3.9 million barrel fall, pushing US light crude oil prices to another new record of $96.24.^[11] Prices continued to rise to a peak of $98.62 on November 7, 2007 before starting to fall.^[12]

On January 2, 2008, oil prices rose to $100 per barrel on the combined effect of violence in Nigeria, Algeria, and Pakistan, the weak US dollar and the threat of cold weather. On January 3, 2008 oil again hit an intraday high of $100 due to higher than expected decline in crude oil supplies. ^[13][14]

A high price for the foreseeable future

Fatih Birol, chief economist of the International Energy Agency expressed his opinion in October 2007 that oil prices will remain high for the foreseeable future. Birol says this is due to rapid increases in demand from the rapidly growing economies of India and China.^[15] The ministers of OPEC, meeting in early December 2007, appeared to reach a consensus for high, but stable prices. This price point would deliver consistently high income to the oil producing states, but avoid prices so high that they would depress the economies of the oil consuming nations. A range of 70-80 dollars a barrel was suggested by some analysts to be OPEC's goal.^[16] Major oil exporting countries are rapidly developing and are using more oil domestically. Particularly significant are Indonesia, which no longer exports oil, Mexico and Iran, where projected demand will exceed production in about 5 years, and Russia, which is growing rapidly.^[17]

Market listings

Main article: Commodities markets

Oil is marketed among other products in commodities markets. See above for details.

References

See also

• Asymmetric price transmission
• Energy efficiency
• Gasoline usage and pricing
• Plug-in hybrid
• Price gouging
• Peak oil