Price of petroleum

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The price of petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

as quoted in news generally refers to the spot price
Spot price
The spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate settlement . Spot settlement is normally one or two business days from trade date...

 per barrel (159 liters) of either WTI
West Texas Intermediate
West Texas Intermediate , also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. It is a light and sweet crude oil...

/light crude
Light crude oil
Light crude oil is liquid petroleum that has a low density and flows freely at room temperature. It has a low viscosity, low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. It generally has a low wax content...

 as traded on the New York Mercantile Exchange
New York Mercantile Exchange
The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

 (NYMEX) for delivery at Cushing, Oklahoma
Cushing, Oklahoma
Cushing is a city in Payne County, Oklahoma, United States. The population was 8,371 at the 2000 census.The city was established after the Land Run of 1891 by Billy Rae Little. It was named for Marshall Cushing, private secretary to U.S. Postmaster General John Wanamaker...

, or of Brent
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

 as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange
International Petroleum Exchange
The International Petroleum Exchange, based in London, was one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude was a world benchmark for oil prices, but the exchange also handled futures contracts and options on fuel oil, natural gas, electricity ,...

 has been incorporated) for delivery at Sullom Voe
Sullom Voe
Sullom Voe is an inlet between North Mainland and Northmavine on Shetland in Scotland. It is a location of the Sullom Voe oil terminal. The word Voe is from the Old Norse vagr and denotes a small bay or narrow creek...

.

The price of a barrel of oil is highly dependent on both its grade, determined by factors such as its specific gravity or API
API gravity
The American Petroleum Institute gravity, or API gravity, is a measure of how heavy or light a petroleum liquid is compared to water. If its API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks...

 and its sulphur content, and its location. Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration
Energy Information Administration
The U.S. Energy Information Administration is the statistical and analytical agency within the U.S. Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and...

 (EIA) uses the imported refiner acquisition cost, the weighted average
Weighted mean
The weighted mean is similar to an arithmetic mean , where instead of each of the data points contributing equally to the final average, some data points contribute more than others...

 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
International Energy Agency
The International Energy Agency is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development in 1974 in the wake of the 1973 oil crisis...

, high oil prices generally have a large negative impact on the global economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

.

The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960 to try and counter the oil companies cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...

, which had been controlling posted prices since the so-called 1927 Red Line Agreement
Red Line Agreement
The Red Line Agreement is the name given to an agreement signed by partners in the Turkish Petroleum Company on July 31, 1928. The aim of the agreement was to formalize the corporate structure of TPC and bind all partners to a self-denial clause that prohibited any of its shareholders from...

 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
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

 price hit $100 a barrel for the first time since October 2008, on concerns about the political unrest in Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...

.

History


{{About|the price of crude oil|information about derivative motor fuels|gasoline and diesel usage and pricing|detailed history of price movements since 2003|2003 to 2011 world oil market chronology}}


The price of petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

as quoted in news generally refers to the spot price
Spot price
The spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate settlement . Spot settlement is normally one or two business days from trade date...

 per barrel (159 liters) of either WTI
West Texas Intermediate
West Texas Intermediate , also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. It is a light and sweet crude oil...

/light crude
Light crude oil
Light crude oil is liquid petroleum that has a low density and flows freely at room temperature. It has a low viscosity, low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. It generally has a low wax content...

 as traded on the New York Mercantile Exchange
New York Mercantile Exchange
The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

 (NYMEX) for delivery at Cushing, Oklahoma
Cushing, Oklahoma
Cushing is a city in Payne County, Oklahoma, United States. The population was 8,371 at the 2000 census.The city was established after the Land Run of 1891 by Billy Rae Little. It was named for Marshall Cushing, private secretary to U.S. Postmaster General John Wanamaker...

, or of Brent
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

 as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange
International Petroleum Exchange
The International Petroleum Exchange, based in London, was one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude was a world benchmark for oil prices, but the exchange also handled futures contracts and options on fuel oil, natural gas, electricity ,...

 has been incorporated) for delivery at Sullom Voe
Sullom Voe
Sullom Voe is an inlet between North Mainland and Northmavine on Shetland in Scotland. It is a location of the Sullom Voe oil terminal. The word Voe is from the Old Norse vagr and denotes a small bay or narrow creek...

.

The price of a barrel of oil is highly dependent on both its grade, determined by factors such as its specific gravity or API
API gravity
The American Petroleum Institute gravity, or API gravity, is a measure of how heavy or light a petroleum liquid is compared to water. If its API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks...

 and its sulphur content, and its location. Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration
Energy Information Administration
The U.S. Energy Information Administration is the statistical and analytical agency within the U.S. Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and...

 (EIA) uses the imported refiner acquisition cost, the weighted average
Weighted mean
The weighted mean is similar to an arithmetic mean , where instead of each of the data points contributing equally to the final average, some data points contribute more than others...

 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
International Energy Agency
The International Energy Agency is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development in 1974 in the wake of the 1973 oil crisis...

, high oil prices generally have a large negative impact on the global economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

.

The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960 to try and counter the oil companies cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...

, which had been controlling posted prices since the so-called 1927 Red Line Agreement
Red Line Agreement
The Red Line Agreement is the name given to an agreement signed by partners in the Turkish Petroleum Company on July 31, 1928. The aim of the agreement was to formalize the corporate structure of TPC and bind all partners to a self-denial clause that prohibited any of its shareholders from...

 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
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

 price hit $100 a barrel for the first time since October 2008, on concerns about the political unrest in Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...

.

History


{{further |1967 Oil Embargo
1967 Oil Embargo
The 1967 Oil Embargo began on June 6, 1967, one day after the beginning of the Six-Day War, with a joint Arab decision to deter any countries from supporting Israel militarily. Several Middle Eastern countries eventually limited their oil shipments, some embargoing only the United States and the...

|1973 oil crisis
1973 oil crisis
The 1973 oil crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC proclaimed an oil embargo. This was "in response to the U.S. decision to re-supply the Israeli military" during the Yom Kippur war. It lasted until March 1974. With the...

|1979 energy crisis
1979 energy crisis
The 1979 oil crisis in the United States occurred in the wake of the Iranian Revolution. Amid massive protests, the Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979 and the Ayatollah Khomeini soon became the new leader of Iran. Protests severely disrupted the Iranian oil...

|1980s oil glut
1980s oil glut
The 1980s oil glut was a serious surplus of crude oil caused by falling demand following the 1970s Energy Crisis. The world price of oil, which had peaked in 1980 at over US$35 per barrel , fell in 1986 from $27 to below $10...

|Oil price increase of 1990
Oil price increase of 1990
The 1990 oil price spike occurred in response to the Iraqi invasion of Kuwait on August 2, 1990. Lasting only 9 months, the price shock was less extreme and of shorter duration than the previous oil crises of 1973 and 1979-1980, yet the rise in prices is widely believed to have been a significant...

}}
{{About|the price of crude oil|information about derivative motor fuels|gasoline and diesel usage and pricing|detailed history of price movements since 2003|2003 to 2011 world oil market chronology}}


The price of petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

as quoted in news generally refers to the spot price
Spot price
The spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate settlement . Spot settlement is normally one or two business days from trade date...

 per barrel (159 liters) of either WTI
West Texas Intermediate
West Texas Intermediate , also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. It is a light and sweet crude oil...

/light crude
Light crude oil
Light crude oil is liquid petroleum that has a low density and flows freely at room temperature. It has a low viscosity, low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. It generally has a low wax content...

 as traded on the New York Mercantile Exchange
New York Mercantile Exchange
The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

 (NYMEX) for delivery at Cushing, Oklahoma
Cushing, Oklahoma
Cushing is a city in Payne County, Oklahoma, United States. The population was 8,371 at the 2000 census.The city was established after the Land Run of 1891 by Billy Rae Little. It was named for Marshall Cushing, private secretary to U.S. Postmaster General John Wanamaker...

, or of Brent
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

 as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange
International Petroleum Exchange
The International Petroleum Exchange, based in London, was one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude was a world benchmark for oil prices, but the exchange also handled futures contracts and options on fuel oil, natural gas, electricity ,...

 has been incorporated) for delivery at Sullom Voe
Sullom Voe
Sullom Voe is an inlet between North Mainland and Northmavine on Shetland in Scotland. It is a location of the Sullom Voe oil terminal. The word Voe is from the Old Norse vagr and denotes a small bay or narrow creek...

.

The price of a barrel of oil is highly dependent on both its grade, determined by factors such as its specific gravity or API
API gravity
The American Petroleum Institute gravity, or API gravity, is a measure of how heavy or light a petroleum liquid is compared to water. If its API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks...

 and its sulphur content, and its location. Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration
Energy Information Administration
The U.S. Energy Information Administration is the statistical and analytical agency within the U.S. Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and...

 (EIA) uses the imported refiner acquisition cost, the weighted average
Weighted mean
The weighted mean is similar to an arithmetic mean , where instead of each of the data points contributing equally to the final average, some data points contribute more than others...

 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
International Energy Agency
The International Energy Agency is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development in 1974 in the wake of the 1973 oil crisis...

, high oil prices generally have a large negative impact on the global economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

.

The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960 to try and counter the oil companies cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...

, which had been controlling posted prices since the so-called 1927 Red Line Agreement
Red Line Agreement
The Red Line Agreement is the name given to an agreement signed by partners in the Turkish Petroleum Company on July 31, 1928. The aim of the agreement was to formalize the corporate structure of TPC and bind all partners to a self-denial clause that prohibited any of its shareholders from...

 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
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

 price hit $100 a barrel for the first time since October 2008, on concerns about the political unrest in Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...

.

History


{{further |1967 Oil Embargo
1967 Oil Embargo
The 1967 Oil Embargo began on June 6, 1967, one day after the beginning of the Six-Day War, with a joint Arab decision to deter any countries from supporting Israel militarily. Several Middle Eastern countries eventually limited their oil shipments, some embargoing only the United States and the...

|1973 oil crisis
1973 oil crisis
The 1973 oil crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC proclaimed an oil embargo. This was "in response to the U.S. decision to re-supply the Israeli military" during the Yom Kippur war. It lasted until March 1974. With the...

|1979 energy crisis
1979 energy crisis
The 1979 oil crisis in the United States occurred in the wake of the Iranian Revolution. Amid massive protests, the Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979 and the Ayatollah Khomeini soon became the new leader of Iran. Protests severely disrupted the Iranian oil...

|1980s oil glut
1980s oil glut
The 1980s oil glut was a serious surplus of crude oil caused by falling demand following the 1970s Energy Crisis. The world price of oil, which had peaked in 1980 at over US$35 per barrel , fell in 1986 from $27 to below $10...

|Oil price increase of 1990
Oil price increase of 1990
The 1990 oil price spike occurred in response to the Iraqi invasion of Kuwait on August 2, 1990. Lasting only 9 months, the price shock was less extreme and of shorter duration than the previous oil crises of 1973 and 1979-1980, yet the rise in prices is widely believed to have been a significant...

}}

{{imageframe|width=800|align=left|caption=Long-term oil prices, 1861-2008 (orange line adjusted for inflation, blue not adjusted). Due to exchange rate fluctuations, the orange line represents the price experience of U.S. consumers only.
|content=
{{superimpose
|base = Oil Prices 1861 2007.svg
|base_width = 800px
|base_caption = Long-term oil prices, 1861-2008 (orange line adjusted for inflation, blue not adjusted). The blue dot indicates the price as of 10 June 2009: 69.55 US$
|float = Blue pog.svg
|float_width = 10px
|float_caption = 69.55 US$ at 10 June 2009


{{About|the price of crude oil|information about derivative motor fuels|gasoline and diesel usage and pricing|detailed history of price movements since 2003|2003 to 2011 world oil market chronology}}


The price of petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

as quoted in news generally refers to the spot price
Spot price
The spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate settlement . Spot settlement is normally one or two business days from trade date...

 per barrel (159 liters) of either WTI
West Texas Intermediate
West Texas Intermediate , also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. It is a light and sweet crude oil...

/light crude
Light crude oil
Light crude oil is liquid petroleum that has a low density and flows freely at room temperature. It has a low viscosity, low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. It generally has a low wax content...

 as traded on the New York Mercantile Exchange
New York Mercantile Exchange
The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

 (NYMEX) for delivery at Cushing, Oklahoma
Cushing, Oklahoma
Cushing is a city in Payne County, Oklahoma, United States. The population was 8,371 at the 2000 census.The city was established after the Land Run of 1891 by Billy Rae Little. It was named for Marshall Cushing, private secretary to U.S. Postmaster General John Wanamaker...

, or of Brent
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

 as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange
International Petroleum Exchange
The International Petroleum Exchange, based in London, was one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude was a world benchmark for oil prices, but the exchange also handled futures contracts and options on fuel oil, natural gas, electricity ,...

 has been incorporated) for delivery at Sullom Voe
Sullom Voe
Sullom Voe is an inlet between North Mainland and Northmavine on Shetland in Scotland. It is a location of the Sullom Voe oil terminal. The word Voe is from the Old Norse vagr and denotes a small bay or narrow creek...

.

The price of a barrel of oil is highly dependent on both its grade, determined by factors such as its specific gravity or API
API gravity
The American Petroleum Institute gravity, or API gravity, is a measure of how heavy or light a petroleum liquid is compared to water. If its API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks...

 and its sulphur content, and its location. Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration
Energy Information Administration
The U.S. Energy Information Administration is the statistical and analytical agency within the U.S. Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and...

 (EIA) uses the imported refiner acquisition cost, the weighted average
Weighted mean
The weighted mean is similar to an arithmetic mean , where instead of each of the data points contributing equally to the final average, some data points contribute more than others...

 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
International Energy Agency
The International Energy Agency is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development in 1974 in the wake of the 1973 oil crisis...

, high oil prices generally have a large negative impact on the global economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

.

The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960 to try and counter the oil companies cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...

, which had been controlling posted prices since the so-called 1927 Red Line Agreement
Red Line Agreement
The Red Line Agreement is the name given to an agreement signed by partners in the Turkish Petroleum Company on July 31, 1928. The aim of the agreement was to formalize the corporate structure of TPC and bind all partners to a self-denial clause that prohibited any of its shareholders from...

 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
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

 price hit $100 a barrel for the first time since October 2008, on concerns about the political unrest in Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...

.

History


{{further |1967 Oil Embargo
1967 Oil Embargo
The 1967 Oil Embargo began on June 6, 1967, one day after the beginning of the Six-Day War, with a joint Arab decision to deter any countries from supporting Israel militarily. Several Middle Eastern countries eventually limited their oil shipments, some embargoing only the United States and the...

|1973 oil crisis
1973 oil crisis
The 1973 oil crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC proclaimed an oil embargo. This was "in response to the U.S. decision to re-supply the Israeli military" during the Yom Kippur war. It lasted until March 1974. With the...

|1979 energy crisis
1979 energy crisis
The 1979 oil crisis in the United States occurred in the wake of the Iranian Revolution. Amid massive protests, the Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979 and the Ayatollah Khomeini soon became the new leader of Iran. Protests severely disrupted the Iranian oil...

|1980s oil glut
1980s oil glut
The 1980s oil glut was a serious surplus of crude oil caused by falling demand following the 1970s Energy Crisis. The world price of oil, which had peaked in 1980 at over US$35 per barrel , fell in 1986 from $27 to below $10...

|Oil price increase of 1990
Oil price increase of 1990
The 1990 oil price spike occurred in response to the Iraqi invasion of Kuwait on August 2, 1990. Lasting only 9 months, the price shock was less extreme and of shorter duration than the previous oil crises of 1973 and 1979-1980, yet the rise in prices is widely believed to have been a significant...

}}

{{imageframe|width=800|align=left|caption=Long-term oil prices, 1861-2008 (orange line adjusted for inflation, blue not adjusted). Due to exchange rate fluctuations, the orange line represents the price experience of U.S. consumers only.
|content=
{{superimpose
|base = Oil Prices 1861 2007.svg
|base_width = 800px
|base_caption = Long-term oil prices, 1861-2008 (orange line adjusted for inflation, blue not adjusted). The blue dot indicates the price as of 10 June 2009: 69.55 US$
|float = Blue pog.svg
|float_width = 10px
|float_caption = 69.55 US$ at 10 June 2009


{{About|the price of crude oil|information about derivative motor fuels|gasoline and diesel usage and pricing|detailed history of price movements since 2003|2003 to 2011 world oil market chronology}}


The price of petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

as quoted in news generally refers to the spot price
Spot price
The spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate settlement . Spot settlement is normally one or two business days from trade date...

 per barrel (159 liters) of either WTI
West Texas Intermediate
West Texas Intermediate , also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. It is a light and sweet crude oil...

/light crude
Light crude oil
Light crude oil is liquid petroleum that has a low density and flows freely at room temperature. It has a low viscosity, low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. It generally has a low wax content...

 as traded on the New York Mercantile Exchange
New York Mercantile Exchange
The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

 (NYMEX) for delivery at Cushing, Oklahoma
Cushing, Oklahoma
Cushing is a city in Payne County, Oklahoma, United States. The population was 8,371 at the 2000 census.The city was established after the Land Run of 1891 by Billy Rae Little. It was named for Marshall Cushing, private secretary to U.S. Postmaster General John Wanamaker...

, or of Brent
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

 as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange
International Petroleum Exchange
The International Petroleum Exchange, based in London, was one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude was a world benchmark for oil prices, but the exchange also handled futures contracts and options on fuel oil, natural gas, electricity ,...

 has been incorporated) for delivery at Sullom Voe
Sullom Voe
Sullom Voe is an inlet between North Mainland and Northmavine on Shetland in Scotland. It is a location of the Sullom Voe oil terminal. The word Voe is from the Old Norse vagr and denotes a small bay or narrow creek...

.

The price of a barrel of oil is highly dependent on both its grade, determined by factors such as its specific gravity or API
API gravity
The American Petroleum Institute gravity, or API gravity, is a measure of how heavy or light a petroleum liquid is compared to water. If its API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks...

 and its sulphur content, and its location. Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration
Energy Information Administration
The U.S. Energy Information Administration is the statistical and analytical agency within the U.S. Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and...

 (EIA) uses the imported refiner acquisition cost, the weighted average
Weighted mean
The weighted mean is similar to an arithmetic mean , where instead of each of the data points contributing equally to the final average, some data points contribute more than others...

 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
International Energy Agency
The International Energy Agency is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development in 1974 in the wake of the 1973 oil crisis...

, high oil prices generally have a large negative impact on the global economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

.

The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960 to try and counter the oil companies cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...

, which had been controlling posted prices since the so-called 1927 Red Line Agreement
Red Line Agreement
The Red Line Agreement is the name given to an agreement signed by partners in the Turkish Petroleum Company on July 31, 1928. The aim of the agreement was to formalize the corporate structure of TPC and bind all partners to a self-denial clause that prohibited any of its shareholders from...

 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
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

 price hit $100 a barrel for the first time since October 2008, on concerns about the political unrest in Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...

.

History


{{further |1967 Oil Embargo
1967 Oil Embargo
The 1967 Oil Embargo began on June 6, 1967, one day after the beginning of the Six-Day War, with a joint Arab decision to deter any countries from supporting Israel militarily. Several Middle Eastern countries eventually limited their oil shipments, some embargoing only the United States and the...

|1973 oil crisis
1973 oil crisis
The 1973 oil crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC proclaimed an oil embargo. This was "in response to the U.S. decision to re-supply the Israeli military" during the Yom Kippur war. It lasted until March 1974. With the...

|1979 energy crisis
1979 energy crisis
The 1979 oil crisis in the United States occurred in the wake of the Iranian Revolution. Amid massive protests, the Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979 and the Ayatollah Khomeini soon became the new leader of Iran. Protests severely disrupted the Iranian oil...

|1980s oil glut
1980s oil glut
The 1980s oil glut was a serious surplus of crude oil caused by falling demand following the 1970s Energy Crisis. The world price of oil, which had peaked in 1980 at over US$35 per barrel , fell in 1986 from $27 to below $10...

|Oil price increase of 1990
Oil price increase of 1990
The 1990 oil price spike occurred in response to the Iraqi invasion of Kuwait on August 2, 1990. Lasting only 9 months, the price shock was less extreme and of shorter duration than the previous oil crises of 1973 and 1979-1980, yet the rise in prices is widely believed to have been a significant...

}}

{{imageframe|width=800|align=left|caption=Long-term oil prices, 1861-2008 (orange line adjusted for inflation, blue not adjusted). Due to exchange rate fluctuations, the orange line represents the price experience of U.S. consumers only.
|content=
{{superimpose
|base = Oil Prices 1861 2007.svg
|base_width = 800px
|base_caption = Long-term oil prices, 1861-2008 (orange line adjusted for inflation, blue not adjusted). The blue dot indicates the price as of 10 June 2009: 69.55 US$
|float = Blue pog.svg
|float_width = 10px
|float_caption = 69.55 US$ at 10 June 2009


}} }}
{{clr}}

Price history before 2003


A low point was reached in January 1999 of 17 USD 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


{{main|2003 to 2011 world oil market chronology}}
{{further |2000s energy crisis}}

Benchmark pricing


{{main |Benchmark (crude oil)}}
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
Pemex
Petróleos Mexicanos or Pemex is a Mexican state-owned petroleum company. As of 2010, with a total asset worth of $415.75 billion, it is the second non-publicly listed largest company in the world by total market value, and Latin America's second largest enterprise by annual revenue as of 2009...

 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
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...

, WTI
West Texas Intermediate
West Texas Intermediate , also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. It is a light and sweet crude oil...

 , and
Dubai/Oman
Dubai Crude
Dubai Crude is a light sour crude oil extracted from Dubai. Dubai Crude is used as a price benchmark or oil marker because it is one of only a few Persian Gulf crude oils available immediately. The other two main oil markers are Brent Crude and West Texas Intermediate.Dubai Crude is generally used...

.

Market listings


{{main|Commodities markets}}
Oil is marketed among other products in commodities markets. See above for details. Widely traded oil futures, and related natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...

 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
      Henry Hub
      ]The Henry hub is the pricing point for natural gas futures contracts traded on the New York Mercantile Exchange . It is a point on the natural gas pipeline system in Erath, Louisiana...

       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


The surge in oil prices in the past several years has led some commentators to argue that at least some of the rise is due to speculation
Speculation
In finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum...

 in the futures markets
Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...

. For instance, James K. Galbraith
James K. Galbraith
James Kenneth Galbraith is an American economist who writes frequently for mainstream and liberal publications on economic topics. He is currently a professor at the Lyndon B. Johnson School of Public Affairs and at the Department of Government, University of Texas at Austin. He is also a Senior...

 believes that much of the rise is due to the "Enron loophole
Enron loophole
The "Enron loophole" exempts most over-the-counter energy trades and trading on electronic energy commodity markets from government regulation....

" drafted in a rider by former Texas senator Phil Gramm
Phil Gramm
William Philip "Phil" Gramm is an American economist and politician, who has served as a Democratic Congressman , a Republican Congressman and a Republican Senator from Texas...

, which allowed energy futures to avoid Commodity Futures Trading Commission
Commodity Futures Trading Commission
The U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....

 oversight. However, investigations have concluded that speculation was not responsible for the rise.

Future price changes


In 2009, Seismic Micro-Technology
Seismic Micro-Technology
Seismic Micro – Technology , is the maker of KINGDOM software. It is the global market share leader for Windows based interpretation. SMT developed the first seismic interpretation tools for the Windows environment. KINGDOM software is used by 2,700 companies in over 95 countries...

 conducted a survey of geophysicists and geologist
Geologist
A geologist is a scientist who studies the solid and liquid matter that constitutes the Earth as well as the processes and history that has shaped it. Geologists usually engage in studying geology. Geologists, studying more of an applied science than a theoretical one, must approach Geology using...

s about the future of crude oil. Of the survey participants 80 percent predicted the price for a barrel of oil will rise to be somewhere between $50 and $100 per barrel by June 2010. Another 50 percent saying it will rise even further to $100 to $150 a barrel in the next five years.

Oil prices could go to $200- $300 a barrel if the world's top crude exporter Saudi Arabia is hit by serious political unrest, according to former Saudi oil minister Sheikh Yamani. Yamani has
said that underlying discontent remained unresolved in Saudi Arabia. "If something happens in Saudi Arabia it will go to $200 to $300. I don't expect this for the time being, but who would have expected Tunisia?" Yamani told Reuters on the sidelines of a conference of the Centre for Global Energy Studies (CGES) which he chaired on April 5th 2011.

CFTC investigation


The U.S. Commodity Futures Trading Commission
Commodity Futures Trading Commission
The U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....

 (CFTC) 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
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...

 and ICE Futures Europe
IntercontinentalExchange
IntercontinentalExchange, Inc., known as ICE, is an American financial company that operates Internet-based marketplaces which trade futures and over-the-counter energy and commodity contracts as well as derivative financial products...

 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
Speculation
In finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum...

 had not caused significant changes in oil prices and that fundamental supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...

 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
World economy
The world economy, or global economy, generally refers to the economy, which is based on economies of all of the world's countries, national economies. Also global economy can be seen as the economy of global society and national economies – as economies of local societies, making the global one....

 had expanded
Economic expansion
An economic expansion is an increase in the level of economic activity, and of the goods and services available in the market place. It is a period of economic growth as measured by a rise in real GDP.The explanation of such fluctuations in aggregate economic activity is one of the primary...

 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
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...

 attempted to balance scarce supply
Price elasticity of supply
Price elasticity of supply is a measure used in economics to show the responsiveness, or elasticity, of the quantity supplied of a good or service to a change in its price....

 against growing demand
Price elasticity of demand
Price elasticity of demand is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price...

, 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.

See also

  • 2007–2008 world food price crisis
    2007–2008 world food price crisis
    World food prices increased dramatically in 2007 and the 1st and 2nd quarter of 2008 creating a global crisis and causing political and economical instability and social unrest in both poor and developed nations. Systemic causes for the worldwide increases in food prices continue to be the subject...

  • Chronology of world oil market events (1970-2005)
    Chronology of world oil market events (1970-2005)
    -1970:*January 1: U.S. Federal oil depletion allowance reduced from 27.5 to 22.0 percent.*May 3: TAP line from Saudi Arabia to the Mediterranean interrupted in Syria, creating all-time tanker rate highs from June to December....

  • Asymmetric price transmission
    Asymmetric price transmission
    Asymmetric price transmission refers to pricing phenomenon occurring when downstream prices react in a different manner to upstream price changes, depending on the characteristics of upstream prices or changes in those prices.The simplest example is when prices of ready products increase promptly...

  • Elasticity (economics)
    Elasticity (economics)
    In economics, elasticity is the measurement of how changing one economic variable affects others. For example:* "If I lower the price of my product, how much more will I sell?"* "If I raise the price, how much less will I sell?"...

  • Energy crisis
    Energy crisis
    An energy crisis is any great bottleneck in the supply of energy resources to an economy. In popular literature though, it often refers to one of the energy sources used at a certain time and place, particularly those that supply national electricity grids or serve as fuel for vehicles...

  • Efficient energy use
    Efficient energy use
    Efficient energy use, sometimes simply called energy efficiency, is the goal of efforts to reduce the amount of energy required to provide products and services. For example, insulating a home allows a building to use less heating and cooling energy to achieve and maintain a comfortable temperature...

  • Food vs fuel
    Food vs fuel
    Food vs. fuel is the dilemma regarding the risk of diverting farmland or crops for biofuels production in detriment of the food supply on a global scale. The "food vs. fuel" or "food or fuel" debate is international in scope, with good and valid arguments on all sides of this issue...

  • Gasoline usage and pricing
  • Peak oil
    Peak oil
    Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. This concept is based on the observed production rates of individual oil wells, projected reserves and the combined production rate of a field...

  • Simmons–Tierney bet
  • Stagflation
    Stagflation
    In economics, stagflation is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high...

  • Supply and Demand
    Supply and demand
    Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...


External links



{{Petroleum industry}}

.

{{DEFAULTSORT:Price Of Petroleum}}