The price of petroleum as quoted in news in North America generally refers to the WTI
Cushing Crude Oil Spot Price West Texas Intermediate, also known as Texas Light Sweet, is a type
of crude oil used as a benchmark in oil pricing and the underlying commodity of New York Mercantile
Exchange's oil futures contracts.
WTI is a light crude oil, lighter than Brent Crude oil.
It contains about 0.24% sulfur, rating it a sweet crude, sweeter than Brent.
Its properties and production site make it ideal for being refined in the United States,
mostly in the Midwest and Gulf Coast regions.
WTI has an API gravity of around 39.6 per barrel of either WTI/light crude as traded
on the New York Mercantile Exchange for delivery at Cushing, Oklahoma, or of Brent as traded
on the Intercontinental Exchange for delivery at Sullom Voe.
Cushing, Oklahoma, a major oil supply hub connecting oil suppliers to the Gulf Coast,
has become the most significant trading hub for crude oil in North America.
The price of a barrel of oil is highly dependent on both its grade, determined by factors such
as its specific gravity or API and its sulphur content, and its location.
Other important benchmarks include Dubai, Tapis, and the OPEC basket.
The Energy Information Administration uses the imported refiner acquisition cost, the
weighted average cost of all oil imported into the US, as its "world oil price".
The demand for oil is highly dependent on global macroeconomic conditions.
According to the International Energy Agency, high oil prices generally have a large negative
impact on the global economic growth.
The Organization of the Petroleum Exporting Countries was formed in 1960 to try to counter
the oil companies cartel, which had been controlling posted prices since the so-called 1927 Red
Line Agreement and 1928 Achnacarry Agreement, and had achieved a high level of price stability
until 1972.
The price of oil underwent a significant decrease after the record peak of US$145 it reached
in July 2008.
On December 23, 2008, WTI crude oil spot price fell to US$30.28 a barrel, the lowest since
the financial crisis of 2007–2010 began, and traded at between US$35 a barrel and US$82
a barrel in 2009.
On 31 January 2011, the Brent price hit $100 a barrel for the first time since October
2008, on concerns about the political unrest in Egypt.
History
Price history before 2003 A low point was reached in January 1999 of
US$17 per barrel, after increased oil production from Iraq coincided with the Asian Financial
Crisis, which reduced demand.
Prices then increased rapidly, more than doubling by September 2000 to $35, then fell until
the end of 2001 before steadily increasing, reaching $40–50 by September 2004.
Price history from 2003 onwards
Benchmark pricing
After the collapse of the OPEC-administered pricing system in 1985, and a short lived
experiment with netback pricing, oil-exporting countries adopted a market-linked pricing
mechanism.
First adopted by PEMEX in 1986, market-linked pricing received wide acceptance and by 1988
became and still is the main method for pricing crude oil in international trade.
The current reference, or pricing markers, are Brent, WTI, and Dubai/Oman.
Market listings
Oil is marketed among other products in commodity markets.
See above for details.
Widely traded oil futures, and related natural gas futures, include:
Petroleum Nymex Crude Future
Dated Brent Spot WTI Cushing Spot
Nymex Heating Oil Future Nymex RBOB Gasoline Future
Natural gas Nymex Henry Hub Future
Henry Hub Spot New York City Gate Spot
Most of the above oil futures have delivery dates in all 12 months of the year.
Speculation Business Week reported that the surge in oil
prices prior to 2008 had led some commentators to argue that at least some of the rise was
due to speculation in the futures markets.
CFTC investigation The U.S. Commodity Futures Trading Commission
announced "Multiple Energy Market Initiatives" on May 29, 2008.
Part 1 is "Expanded International Surveillance Information for Crude Oil Trading."
The CFTC announcement stated it has joined with the United Kingdom Financial Services
Authority and ICE Futures Europe in order to expand surveillance and information sharing
of various futures contracts.
This announcement has received wide coverage in the financial press, with speculation about
oil futures price manipulation.
The interim report by the Interagency Task Force, released in July, found that speculation
had not caused significant changes in oil prices and that fundamental supply and demand
factors provide the best explanation for the crude oil price increases.
The report found that the primary reason for the price increases was that the world economy
had expanded at its fastest pace in decades, resulting in substantial increases in the
demand for oil, while the oil production grew sluggishly, compounded by production shortfalls
in oil-exporting countries.
The report stated that as a result of the imbalance and low price elasticity, very large
price increases occurred as the market attempted to balance scarce supply against growing demand,
particularly in the last three years.
The report forecast that this imbalance would persist in the future, leading to continued
upward pressure on oil prices, and that large or rapid movements in oil prices are likely
to occur even in the absence of activity by speculators.
The task force continues to analyze commodity markets and intends to issue further findings
later in the year.
Trade currency Generally the trade currency for petroleum
is the U.S. dollar.
However with the blockade of Iran banks, Iran started talks about other currency-for-oil.
India is even considering paying for its oil in gold bullion.
However, it is more likely that India will pay in rupees.
Depending on the sanctions, and increasing pressure in countries like China, which especially
wants to pay in Yuan for their investments in Africa may change the main trade currency.
Of course it is rather not possible to change the currency of main markets, located on the
USA ground or others in the Western hemisphere, but increasing demand of the raising markets,
and possible decreasing usage by Europe, partially USA by artificial ecology laws or economy
related shortages make the moving of the important point and volume of trade to other markets.
Future projections
Peak oil is the period when the maximum rate of global petroleum extraction is reached,
after which the rate of production enters terminal decline.
It relates to a long-term decline in the available supply of petroleum.
This, combined with increasing demand, will significantly increase the worldwide prices
of petroleum derived products.
Most significant will be the availability and price of liquid fuel for transportation.
The US Department of Energy in the Hirsch report indicates that “The problems associated
with world oil production peaking will not be temporary, and past “energy crisis”
experience will provide relatively little guidance.”
The 2014 United Nations World Economic Situation and Prospects report notes that "Oil prices
were on a downward trend in the first half of 2013, as global demand for oil weakened
along with the deceleration in world economic growth overall."
See also 2007–2008 world food price crisis
Asymmetric price transmission Chronology of world oil market events
Cost competitiveness of fuel sources Efficient energy use
Elasticity Energy crisis
Food vs fuel Gasoline usage and pricing
Simmons–Tierney bet Stagflation
Supply and demand References
External links Gasoline and diesel fuel prices, EIA, Department
of Energy.
Historical crude oil prices Gasoline and diesel fuel prices in Europe
Skyrocketing oil prices pummel U.S. national security.
FACTBOX-The World's Oil Shocks CME future prices for light sweet crude, Session
Overview.
History and Analysis of Crude Oil Prices.
NYMEX:BZ is the most commonly quoted price for Brent crude oil
[1] A fair price for motor fuel in the United States
Official monthly oil price, supply and demand discussion from OPEC
The Oil and Gas Value Chain Energy Futures Databrowser Current and historical
charts of NYMEX energy futures chains.
Live oil prices NYMEX Crude oil price chart Major Oil Stocks Largest oil stocks by volume
streaming U.S. Energy Information Administration Part
of the U.S. Department of Energy, official source of price and other statistical information