How Oil Prices Works
27795
Business
Jun 18, 2007
darkforces
How Oil Prices Works
Oil prices are usually referred to as the price that is quoted for an immediate settlement or what they call the spot price of either Light Crude traded on New York Mercantile Exchange (NYMEX) delivered in Cushing Oklahoma; or price of Brent traded on the Intercontinental Exchanged (ICE) which is delivered at Sullom Voe. A barrel equated to 42 gallons of oil is highly dependent on its API gravity (American Petroleum Institute), its sulphur contents, and its location. The majority of oil related products will be traded on an over-the-counter basis rather than traded on an exchange which is referred to a marker crude oil grade and typically quoted via pricing agencies such as Argus Media Ltd. and Platts. Other benchmarks included Dubai, Tapis, and the Organization of Petroleum Exporting Countries (OPEC) basket. EIA or Energy Information Administration, which is responsible for the collection and dissemination of oil prices, production, consumption, distribution, and energy reserves, uses Imported Refiner Acquisition Cost, the average weighted cost of all oil imported into the US as their "world oil price". Oil demand is dependent on the conditions of global micro economy. Moreover, it plays an important role on the determining of price. Economists claim that high oil prices cause a large effect on economic growth. This means that the relationship of oil price and global growth is not that stable, although the increase in oil price is often said to be a late cycle phenomenon and needs to be carefully considered when investing. OPEC, comprised of Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates , and Venezuela , was said to be formed in order to maintain the oil price level that will be beneficial to its members and served as a cartel by most observers. This had its first global impact during the oil crisis the 1970's and continues today to be one of the chief means of controlling the production of oil in many parts of the world. This event is significant today, as we live in a time when many Third World countries are beginning to increase their demand for petroleum and other oil based products. With so much of the world already dependent on a steady flow of oil and related products, it is a safe bet that any cartel or union related to this industry will have an even greater impact over the next several years.
Mayoor Patel is the writer for the website http://oil-prices.oil-universe.com. Please visit for information on all things concerned with Oil Prices
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