{{Short description|Spot price of a barrel of benchmark crude oil}} {{about|the price of crude oil|information about derivative motor fuels|gasoline and diesel usage and pricing|detailed history of price movements since 2003|World oil market chronology from 2003}} {{Multiple issues| {{Update|date=March 2022}} {{Cleanup reorganize|date=October 2021|reason=Overwhelming amount of information|section}} }} {{Use dmy dates|date=May 2021}}
[[File:Oil price benchmarks.webp|thumb|370px|The price of oil from 1983 to 2023 {{legend-line|#929292 solid 3px|West Texas Intermediate}} {{legend-line|#000000 solid 3px|Brent Crude}} {{legend-line|#EE220C solid 3px|Urals oil (Russian export mix)}} {{legend-line|#00A2FF solid 3px|Dubai Crude}} {{legend-line|#A21726 solid 3px|OPEC Reference Basket}} ]] thumb|Oil traders, Houston, 2009 [[File:Graph price of oil 1861 to 2020 WID data.png|thumb|The nominal price of oil from 1861 to 2020 from Our World in Data ]]
The '''price of oil''', or the '''oil price''', generally refers to the spot price of a barrel ({{convert|1.00|oilbbl|U.S.gal L|disp=out|abbr=off}}) of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC Reference Basket, Tapis crude, Bonny Light, Urals oil, Isthmus, and Western Canadian Select (WCS) among others.<ref name="Benchmarks_2011">{{citation |title=International Crude Oil Market Handbook |date=2011 |work= Energy Intelligence Group }}</ref><ref name="pricingdifferences">{{cite web |url=http://tonto.eia.doe.gov/ask/crude_types1.html |title=Pricing Differences Among Various Types of Crude Oil |access-date=17 February 2008 |work=EIA |archive-url=https://web.archive.org/web/20101113164128/http://tonto.eia.doe.gov/ask/crude_types1.html |archive-date=13 November 2010 }}</ref> Oil prices are determined by global supply and demand, rather than any country's domestic production level, although the Organization of the Petroleum Exporting Countries (OPEC) has considerable influence.<ref>{{Cite web |date=16 August 2023 |title=Oil prices and outlook - U.S. Energy Information Administration (EIA) |url=https://www.eia.gov/energyexplained/oil-and-petroleum-products/prices-and-outlook.php |access-date=21 March 2026 |website=U.S. Energy Information Administration}}</ref><ref>{{Cite web |last=Ellerbeck |first=Stefan |date=11 November 2022 |title=What are OPEC and OPEC+? How do they influence oil prices? |url=https://www.weforum.org/stories/2022/11/oil-opec-energy-price/ |url-status=live |access-date=21 March 2026 |website=World Economic Forum}}</ref>
== Through the years == Before oil, whale oil was used in lamps, as lubrication, etc.<ref name=NBER>{{cite web |url=https://www.nber.org/system/files/chapters/c8284/c8284.pdf |title=In Pursuit of Leviathan: Technology, Institutions, Productivity, and Profits in American Whaling, 1816-1906 |date=1997 |author=Lance E. Davis |author2=Robert E. Gallman |author3=Karin Gleiter |work=NBER |publisher=University of Chicago Press | pages=342, 362–363, 373–375 ja 370–372}}</ref> It was very expensive.<ref>{{Cite book |last=Coke |first=David |title=Vauxhall Gardens: a history |last2=Borg |first2=Alan |date=2011 |publisher=Yale University Press |isbn=978-0-300-17382-6 |location=New Haven, Conn. London}}</ref> In 1804, its price was $0.5/gallon or $21/barrel,<ref name=NBER/> which is $575 per barrel in 2025 dollars.<ref>{{cite web|url=https://www.officialdata.org/us/inflation/1804 |title=$100 in 1804 is worth $2,737.69 today |date=Aug 12, 2025 |website=CPI Inflation Calculator}}</ref> Beginning in the 1850s, petroleum quickly replaced whale oil use.<ref name=NBER/>
The global price of crude oil was relatively consistent in the nineteenth century and early twentieth century.<ref name="WID_Ritchie_20171002"/> This changed in the 1970s, with a significant increase in the price of oil globally.<ref name="WID_Ritchie_20171002"/> There have been a number of structural drivers of global oil prices historically, including oil supply, demand, and storage shocks, and shocks to global economic growth affecting oil prices.<ref name="BoC 2019"/>
Notable events driving significant price fluctuations include the 1973 OPEC oil embargo targeting nations that had supported Israel during the Yom Kippur War,<ref>{{cite book |last=Smith |first=Charles D. |date=2006 |title=Palestine and the Arab–Israeli Conflict |location=New York |publisher=Bedford}}</ref>{{rp|329}} resulting in the 1973 oil crisis, the Iranian Revolution in the 1979 oil crisis, the 2008 financial crisis, and the 2010s oil glut that led to the "largest oil price declines in modern history" in 2014 to 2016. The 70% decline in global oil prices was "one of the three biggest declines since World War II, and the longest lasting since the supply-driven collapse of 1986."<ref name="Stocker_20180118">{{cite web |first1=Marc |last1=Stocker |first2=John |last2=Baffes |first3=Dana |last3=Vorisek|date=January 18, 2018| title = What triggered the oil price plunge of 2014-2016 and why it failed to deliver an economic impetus in eight charts| access-date = 19 January 2022| url = https://blogs.worldbank.org/developmenttalk/what-triggered-oil-price-plunge-2014-2016-and-why-it-failed-deliver-economic-impetus-eight-charts}}</ref> By 2015, the United States had become the third-largest producer of oil and resumed exporting oil upon repeal of its 40-year export ban.<ref name="CIA_2015">{{cite web| title = The World Factbook|work=Central Intelligence Agency| access-date = 19 January 2022| date = 2015 |archive-date=11 November 2020| url = https://www.cia.gov/library/publications/resources/the-world-factbook/rankorder/2241rank.html |archive-url=https://web.archive.org/web/20201111224602/https://www.cia.gov/library/publications/resources/the-world-factbook/rankorder/2241rank.html}}</ref><ref>{{cite news |title=U.S. Ruling Loosens Four-Decade Ban On Oil Exports |url=https://www.wsj.com/articles/u-s-ruling-would-allow-first-shipments-of-unrefined-oil-overseas-1403644494 |work=The Wall Street Journal |date=June 24, 2014|author1=Christian Berthelsen|author2=Lynn Cook}}</ref><ref>{{cite news |title=End of Oil-Export Ban Provides Blueprint for Bipartisan Compromise |url=https://www.wsj.com/articles/end-of-oil-export-ban-provides-blueprint-for-bipartisan-compromise-1450521004?mod=trending_now_8 |work=The Wall Street Journal |date=December 20, 2015|author1=Amy Harder|author2=Christian Berthelsen}}</ref>
== Conflict == The 2020 Russia–Saudi Arabia oil price war resulted in a 65% decline in global oil prices at the beginning of the COVID-19 pandemic.<ref name="JPT Jacobs 2020">{{cite web |last1=Jacobs |first1=Trent |title=OPEC+ Moves to End Price War With 10 Million B/D Cut |url=https://pubs.spe.org/en/jpt/jpt-article-detail/?art=6871 |website=pubs.spe.org |publisher=Journal of Petroleum Technology |access-date=10 April 2020 |archive-url= https://web.archive.org/web/20200410202752/https://pubs.spe.org/en/jpt/jpt-article-detail/?art=6871 |archive-date=10 April 2020 |url-status=live |quote=(early March) In the ensuing weeks West Texas Intermediate (WTI) prices fell to a low of around $20, marking a record 65% quarterly drop}}</ref><ref name="OECD 2020">{{cite web| title = The impact of coronavirus (COVID-19) and the global oil price shock on the fiscal position of oil-exporting developing countries| work = OECD |date=30 September 2020| access-date = 19 January 2022| url = https://www.oecd.org/coronavirus/policy-responses/the-impact-of-coronavirus-covid-19-and-the-global-oil-price-shock-on-the-fiscal-position-of-oil-exporting-developing-countries-8bafbd95/}}</ref> In 2021, the record-high energy prices were driven by a global surge in demand as the world recovered from the COVID-19 recession.<ref name="Al-Jazeera">{{cite news |title=Energy crunch: How high will oil prices climb? |url=https://www.aljazeera.com/economy/2021/9/27/energy-crunch-how-high-will-oil-prices-climb |work=Al-Jazeera |date=27 September 2021}}</ref><ref name="CNBC">{{cite news |title=Oil analysts predict a prolonged rally as OPEC resists calls to ramp up supply |url=https://www.cnbc.com/2021/10/05/oil-prices-analysts-see-a-prolonged-rally-as-opec-sticks-to-its-plan.html |work=CNBC |date=5 October 2021}}</ref><ref>{{cite news |title=Column: Oil prices expected to rise with big variation in projections: Kemp |url=https://www.reuters.com/business/energy/oil-prices-expected-rise-with-big-variation-projections-kemp-2022-01-18/ |work=Reuters |date=19 January 2022}}</ref> By December 2021, an unexpected rebound in the demand for oil from United States, China and India, coupled with U.S. shale industry investors' "demands to hold the line on spending", has contributed to "tight" oil inventories globally.<ref>{{Cite news| last1 = Kelly| first1 = Stephanie| last2 = Sharafedin| first2 = Bozorgmehr| last3 = Samanta| first3 = Koustav| title = Global oil's comeback year presages more strength in 2022| work = Reuters| access-date = 19 January 2022| date = 23 December 2021| url = https://www.reuters.com/markets/commodities/global-oils-comeback-year-presages-more-strength-2022-2021-12-23/}}</ref> On 18 January 2022, as the price of Brent crude oil reached its highest since 2014—$88, concerns were raised about the rising cost of gasoline—which hit a record high in the United Kingdom.<ref>{{Cite news| issn = 0261-3077| last = Elliott| first = Larry| title = New UK cost of living threat as oil rises to highest price in seven years| work = The Guardian| access-date = 19 January 2022| date = 18 January 2022| url = https://www.theguardian.com/business/2022/jan/18/uk-cost-of-living-oil-highest-price-in-seven-years-petrol-diesel}}</ref>
In March 2026, international oil prices surpassed the $100 per barrel threshold for the first time since 2022, primarily driven by the outbreak of the 2026 Iran war. On 9 March, the brent crude benchmark surged to an intraday high of $119.50,<ref>{{cite news |last1=Veiga |first1=Alex |last2=Kurtenbach |first2=Elaine |last3=Grantham-Philips |first3=Wyatte |title=Oil prices swing wildly as Iran war threatens transport routes and production across Middle East |url=https://apnews.com/article/markets-oil-iran-trump-war-brent-72e8c9a29c2ba1fd761ee968f3d4e553 |access-date=11 March 2026 |agency=AP News}}</ref> a 29% increase, following strikes on energy infrastructure near Tehran and the effective closure of the Strait of Hormuz. Prices subsequently moderated to approximately $100 per barrel after G7 finance ministers announced a potential coordinated release of strategic petroleum reserves. During the crisis, Iranian officials suggested prices could exceed $200 per barrel if hostilities continued, while the United States executive branch characterized the price spike as a short-term consequence of regional security measures.
==Structural drivers of global oil price== According to Our World in Data, in the nineteenth and early twentieth century the global crude oil prices were "relatively consistent."<ref name="WID_Ritchie_20171002">{{cite journal |last1=Ritchie |first1=Hannah |author1-link=Hannah Ritchie |last2=Roser |first2=Max |author2-link=Max Roser |title=Fossil Fuels |journal=Our World in Data |access-date=6 March 2020 |date=2 October 2017 |url=https://ourworldindata.org/fossil-fuels}}</ref> In the 1970s, there was a "significant increase" in the price of oil globally,<ref name="WID_Ritchie_20171002" /> partially in response to the 1973 and 1979 oil crises. In 1980, globally averaged prices "spiked" to US$107.27.<ref name="WID_Ritchie_20171002" />
thumb|300px|Oil production cost per barrel, by country, 2015 Historically, there have been a number of factors affecting the global price of oil. These have included the Organization of Arab Petroleum Exporting Countries led by Saudi Arabia resulting in the 1973 oil crisis, the Iranian Revolution in the 1979 oil crisis, Iran–Iraq War (1980–88), the 1990 Invasion of Kuwait by Iraq, the 1991 Gulf War, the 1997 Asian financial crisis, the September 11 attacks, the 2002–03 national strike in Venezuela's state-owned oil company Petróleos de Venezuela, S.A. (PDVSA), Organization of the Petroleum Exporting Countries (OPEC), the 2008 financial crisis, OPEC's 2009 cut in oil production,<ref name="Mouawad">{{Cite news |issn=0362-4331 |last=Mouawad |first=Jad |title=OPEC Achieves Cuts in Output, Halting Price Slide |work=The New York Times |access-date=19 January 2022 |date=26 January 2009 |url=https://www.nytimes.com/2009/01/26/business/worldbusiness/26opec.html}}</ref> the Arab Spring 2010s uprisings in Egypt and Libya, and the Syrian civil war (2011–24).
The 2013 oil supply glut that led to the "largest oil price declines in modern history" in 2014 to 2016. The 70% decline in global oil prices was "one of the three biggest declines since World War II, and the longest lasting since the supply-driven collapse of 1986."<ref>{{cite web |title=What triggered the oil price plunge of 2014–2016 and why it failed to deliver an economic impetus in eight charts |access-date=19 January 2022 |url=https://blogs.worldbank.org/developmenttalk/what-triggered-oil-price-plunge-2014-2016-and-why-it-failed-deliver-economic-impetus-eight-charts}}</ref>
By 2015 the United States was the 3rd-largest producer of oil moving from importer to exporter.<ref name="CIA_2015" /> The 2020 Russia–Saudi Arabia oil price war resulted in a 65% decline in global oil prices at the beginning of the COVID-19 pandemic.<ref name="JPT Jacobs 2020" /><ref name="OECD 2020" />
Structural drivers affecting historical global oil prices include are "oil supply shocks, oil-market-specific demand shocks, storage demand shocks", "shocks to global economic growth",<ref name="BoC 2019" /> and "speculative demand for oil stocks above the ground".<ref name="JIMF_Lutz_201404">{{cite journal |doi=10.1016/j.jimonfin.2013.08.005 |issn=0261-5606 |volume=42 |pages=71–87 |last1=Kilian |first1=Lutz |last2=Lee |first2=Thomas K. |title=Quantifying the speculative component in the real price of oil: The role of global oil inventories |journal=Journal of International Money and Finance |date=April 2014 |s2cid=17988336}}</ref>
==Analyses of oil price fluctuations== thumb|Weekly reports on crude oil inventories or total stockpiles in storage facilities like these tanks have a strong bearing on oil prices. Oil prices are determined by global forces of supply and demand, according to the classical economic model of price determination in microeconomics.<ref name="IEA_20040614">{{cite web|url=http://www.iea.org/Textbase/Papers/2004/High_Oil_Prices.pdf|title=Publications|access-date=5 January 2015 |date= 14 June 2005}}</ref><ref>{{cite news |last1=Krauss |first1=Clifford |title=Loss of Russian Oil Leaves a Void Not Easily Filled, Straining Market |url=https://www.nytimes.com/2022/03/09/business/energy-environment/russia-oil-global-economy.html |work=The New York Times |date=March 9, 2022}}</ref><ref>{{cite news |title=Oil and petroleum products explained |publisher=United States Energy Information Administration |date=February 25, 2022}}</ref><ref>{{cite news |title=Ask PolitiFact: Why are gas prices going up? |url=https://www.politifact.com/article/2022/mar/09/ask-politifact-why-are-gas-prices-going/ |publisher=PolitiFact |date=March 9, 2022|author1=Jon Greenberg|author2=Louis Jacobson}}</ref> The demand for oil is highly dependent on global macroeconomic conditions.<ref name="IEA_20040614" /> According to the International Energy Agency, high oil prices generally have a large negative impact on global economic growth.<ref name="IEA_20040614" />
In 1974, in response to the previous year's oil crisis, the RAND Corporation presented a new economic model of the global oil market that included four sectors—"crude production, transportation, refining, and consumption of products"—analyzed separately for six regions: the United States, Canada, Latin America, Europe, the Middle East and Africa, and Asia.<ref name="RAND_Kennedy_1974">{{cite journal |doi=10.2307/3003120 |issn=0005-8556 |volume=5 |issue=2 |pages=540–577 |last=Kennedy |first=Michael |title=An Economic Model of the World Oil Market |journal=The Bell Journal of Economics and Management Science |date=1974 |jstor=3003120}}</ref> The study listed exogenous variables that can affect the price of oil: "regional supply and demand equations, the technology of refining, and government policy variables". Based on these exogenous variables, their proposed economic model would be able to determine the "levels of consumption, production, and price for each commodity in each region, the pattern of world trade flows, and the refinery capital structure and output in each region".<ref name="RAND_Kennedy_1974" />
A system dynamics economic model of oil price determination "integrates various factors affecting" the dynamics of the price of oil, according to a 1992 ''European Journal of Operational Research'' article.<ref name="Morecroft_19920526">{{cite journal |doi=10.1016/0377-2217(92)90009-X |issn=0377-2217 |volume=59 |issue=1 |pages=102–122 |last1=Morecroft |first1=John D. W. |last2=van der Heijden |first2=Kees A. J. M. |title=Modelling the oil producers — Capturing oil industry knowledge in a behavioural simulation model |journal=European Journal of Operational Research |series=Modelling for Learning |date=26 May 1992 }}</ref>
A widely cited 2008 ''The Review of Economics and Statistics'' article by Lutz Killian examined the extent to which "exogenous oil supply shocks"—such as the Iranian revolution (1978–1979), Iran–Iraq War (1980–1988), Persian Gulf War (1990–1991), Iraq War (2003), Civil unrest in Venezuela (2002–2003), and perhaps the Yom Kippur War/Arab oil embargo (1973–1974)"—explain changes in the price of oil."<ref name="Kilian_200080418">{{cite journal |doi=10.1162/rest.90.2.216 |issn=0034-6535 |volume=90 |issue=2 |pages=216–240 |last=Kilian |first=Lutz |title=Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy? |journal=The Review of Economics and Statistics |date=18 April 2008 |s2cid=17883131 }}</ref> Killian stated that, by 2008, there was "widespread recognition" that "oil prices since 1973 must be considered endogenous with respect to global macroeconomic conditions".<ref name="Kilian_200080418" />
Kilian added that these "standard theoretical models of the transmission of oil price shocks that maintain that everything else remains fixed, as the real price of imported crude oil increases, are misleading and must be replaced by models that allow for the endogenous determination of the price of oil." Killian found that there was "no evidence that the 1973–1974 and 2002–2003 oil supply shocks had a substantial impact on real growth in any G7 country, whereas the 1978–1979, 1980, and 1990–1991 shocks contributed to lower growth in at least some G7 countries."<ref>{{cite journal |issn=1542-4766 |volume=6 |issue=1 |pages=78–121 |last=Kilian |first=Lutz |title=A Comparison of the Effects of Exogenous Oil Supply Shocks on Output and Inflation in the G7 Countries |journal=Journal of the European Economic Association |date=2008 |doi=10.1162/JEEA.2008.6.1.78 |jstor=40005152}}</ref>
A 2019 Bank of Canada (BOC) report described the usefulness of a structural vector autoregressive (SVAR) model for conditional forecasts of global GDP growth and oil consumption in relation to four types of oil shocks.<ref name="BoC 2019">{{cite web |last1=Ellwanger |first1=Reinhard |title=A Structural Model of the Global Oil Market |url=https://www.bankofcanada.ca/wp-content/uploads/2019/06/san2019-17.pdf |page=13|publisher=Bank of Canada |access-date=19 January 2022}}</ref> The structural vector autoregressive model was proposed by the American econometrician and macroeconomist Christopher A. Sims in 1982 as an alternative statistical framework model for macroeconomists. According to the BOC report—using the SVAR model—"oil supply shocks were the dominant force during the 2014–15 oil price decline".<ref name="BoC 2019" />
By 2016, despite improved understanding of oil markets, predicting oil price fluctuations remained a challenge for economists according to a 2016 article in the ''Journal of Economic Perspectives'', which was based on an extensive review of academic literature by economists on "all major oil price fluctuations between 1973 and 2014".<ref name="JEP_Baumeister_20160101">{{cite journal|title=Forty Years of Oil Price Fluctuations: Why the Price of Oil May Still Surprise Us|journal=The Journal of Economic Perspectives|date=1 January 2016|pages=139–160|volume=30|issue=1|doi=10.1257/jep.30.1.139|first1=Christiane|last1=Baumeister|first2=Lutz|last2=Kilian|doi-access=free}}</ref>
A 2016 article in the Oxford Institute for Energy Studies describes how analysts offered differing views on why<ref name="OIES+Bassam_2016" /> the price of oil had decreased 55% from "June 2014 to January 2015"<ref name="WB_Baffes_201503" />{{rp|10}} following "four years of relative stability at around US$105 per barrel".<ref name="WB_Baffes_201503" />{{rp|41}} A 2015 World Bank report said that the low prices "likely marks the end of the commodity supercycle that began in the early 2000s" and they expected prices to "remain low for a considerable period of time".<ref name="WB_Baffes_201503" />{{rp|4}}
Goldman Sachs, for example, has called this structural shift the "New Oil Order"—created by the U.S. shale revolution.<ref name="GS_viaQuartz_20150508">{{cite web |publisher=Goldman Sachs |via=Quartz |title='The New Oil Order': Making sense of an industry's transformation |date=8 May 2015 |url=https://qz.com/399790/the-new-oil-order-making-sense-of-an-industrys-transformation/ |access-date=26 October 2020}}</ref> Goldman Sachs said that this structural shift was "reshaping global energy markets and bringing with it a new era of volatility" by "impacting markets, economies, industries and companies worldwide" and will keep the price of oil lower for a prolonged period.<ref name="goldmansachs_20150508">{{cite web |work=Goldman Sachs |title=The New Oil Order: Making Sense of an Industry's Transformation |date=8 May 2015 |url=https://www.goldmansachs.com/insights/pages/the-new-oil-order/ |access-date=26 October 2020}}</ref> Others say that this cycle is like previous cycles and that prices will rise again.<ref name="OIES+Bassam_2016" />
A 2020 ''Energy Economics'' article confirmed that the "supply and demand of global crude oil and the financial market" continued to be the major factors that affected the global price of oil. The researchers, using a new Bayesian structural time series model, found that shale oil production continued to increase its impact on oil price but it remained "relatively small".<ref>{{cite journal |volume=87 |issue=C |last1=Lu |first1=Quanying |last2=Li |first2=Yuze |last3=Chai |first3=Jian |last4=Wang |first4=Shouyang |title=Crude oil price analysis and forecasting: A perspective of 'new triangle' |journal=Energy Economics |access-date=19 January 2022 |date=2020 |article-number=104721 |doi=10.1016/j.eneco.2020.104721 |s2cid=213267999 |url=https://ideas.repec.org/a/eee/eneeco/v87y2020ics0140988320300608.html|url-access=subscription }}</ref>
==Benchmark pricing== {{main|Benchmark (crude oil)|OPEC Reference Basket}}
[[File:Brent vs WTI crude oil.webp|thumb|370px|Prices from 1985 to 2022 {{legend-line|#000000 solid 3px|Brent Crude}} {{legend-line|#B6595E solid 3px|West Texas Intermediate}} ]]
Major benchmark references, or pricing markers, include Brent, WTI,<ref name="Mabro">{{cite book|last=Mabro|first=Robert|others=Organization of Petroleum Exporting Countries|title=Oil in the 21st century: issues, challenges and opportunities|publisher=Oxford Press|year=2006|page=351|isbn=978-0-19-920738-1}}</ref> the OPEC Reference Basket (ORB)—introduced on 16 June 2005 and is made up of Saharan Blend (from Algeria), Girassol (from Angola), Oriente (from Ecuador), Rabi Light (from Gabon), Iran Heavy (from Iran), Basra Light (from Iraq), Kuwait Export (from Kuwait), Es Sider (from Libya), Bonny Light (from Nigeria), Qatar Marine (from Qatar), Arab Light (from Saudi Arabia), Murban (from UAE),<ref>{{cite web |title=Will The World's Newest Oil Benchmark Be A Success?|url=https://oilprice.com/Energy/Oil-Prices/Will-The-Worlds-Newest-Oil-Benchmark-Be-A-Success.html|access-date=31 March 2021}}</ref> and Merey (from Venezuela),<ref>{{cite web |title=OPEC Basket Price |publisher=OPEC |url=http://www.opec.org/opec_web/en/data_graphs/40.htm|access-date=6 January 2017}}</ref> Dubai Crude, and Tapis Crude (from Malaysia).
In North America the benchmark price refers to the spot price of West Texas Intermediate (WTI), also known as Texas Light Sweet, 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.<ref>{{cite web|url=https://rbnenergy.com/the-cost-of-crude-at-cushing-wti-and-the-cma|title=The Cost Of Crude At Cushing – WTI And The NYMEX CMA|date=4 November 2012 |access-date=5 April 2020}}</ref>
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 (specific gravity approx. 0.827) per barrel (159 liters) of either WTI/light crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at Cushing, Oklahoma.<ref>{{cite web|url=https://rbnenergy.com/the-cost-of-crude-at-cushing-the-cma-roll-adjust-and-wti-p-plus|title=The Cost Of Crude At Cushing – The CMA Roll Adjust And WTI P-Plus|date=8 November 2012 |access-date=5 April 2020}}</ref> 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.
In Europe and some other parts of the world, the price of the oil benchmark is Brent Crude as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange has been incorporated) for delivery at Sullom Voe. Brent oil is produced in coastal waters (North Sea) of UK and Norway. The total consumption of crude oil in UK and Norway is more than the oil production in these countries.<ref>{{cite web|url=https://www.livemint.com/news/world/how-a-hasty-move-to-change-the-world-s-key-oil-price-unraveled-11615597687515.html |title=How a hasty move to change the world's key oil price unraveled|date=13 March 2021 |access-date=13 March 2021}}</ref><ref>{{cite web|url=https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2019-full-report.pdf |title=BP Statistical Review 2019|access-date=5 April 2020}}</ref> So Brent crude market is very opaque with very low oil trade physically.<ref>{{cite web|url=https://rbnenergy.com/crazy-little-crude-called-brent-the-physical-trading-market|title=Crazy Little Crude Called Brent – The Physical Trading Market|date=28 February 2013 |access-date=5 April 2020}}</ref><ref>{{cite web|url=https://rbnenergy.com/crazy-little-crude-called-brent-links-to-ice-futures|title=Crazy Little Crude Called Brent – Links To ICE Futures|date=5 March 2013 |access-date=5 April 2020}}</ref><ref>{{cite web|url=https://rbnenergy.com/crazy-little-crude-called-brent-links-to-ice-futures|title=Crazy Little Crude Called Brent – The Art Of Quality Maintenance|date=5 March 2013 |access-date=5 April 2020}}</ref> Brent price is used widely to fix the prices of crude oil, LPG, LNG, natural gas, etc. trade globally including Middle East crude oils.<ref name="RBN_Fielden_20150324">{{cite web|url=https://rbnenergy.com/the-price-you-pay-saudi-crude-price-formulas |first=Sandy |last=Fielden |title=The Price You Pay – Saudi Crude Price Formulas |date=24 March 2015 |access-date=27 October 2020}}</ref>
There is a differential in the price of a barrel of oil based on its grade—determined by factors such as its specific gravity or API gravity and its sulfur content—and its location—for example, its proximity to tidewater and refineries. Heavier, sour crude oils lacking in tidewater access—such as Western Canadian Select—are less expensive than lighter, sweeter oil—such as WTI.<ref>{{Cite news|title = Oil Price Charts| access-date = 6 March 2021| url = https://oilprice.com/oil-price-charts/#prices}}</ref>
The Energy Information Administration (EIA) uses the imported refiner acquisition cost, the weighted average cost of all oil imported into the US, as its "world oil price".
==Global oil prices: a chronology == {{main|World oil market chronology from 2003}}
thumb|upright=1.5|Oil prices in USD, 1861–2015. Measured are 1861–1944 averaged US crude oil, 1945–1983 Arabian Light, 1984–2015 Brent. Red line adjusted for inflation, blue not adjusted.
The price of oil remained "relatively consistent" from 1861 until the 1970s.<ref name="WID_Ritchie_20171002"/> In Daniel Yergin's 1991 Pulitzer prize-winning book ''The Prize: The Epic Quest for Oil, Money, and Power'', Yergin described how the "oil-supply management system"—which had been run by "international oil companies"—had "crumbled" in 1973.<ref name="Yergin_1991"/>{{rp|599}}
Yergin states that the role of Organization of the Petroleum Exporting Countries (OPEC)—which had been established in 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela<ref name=OPEC>{{cite web |url=http://www.opec.org/opec_web/en/about_us/23.htm |title=Our Mission |publisher=OPEC |access-date=16 February 2013}}</ref><ref name="Yergin_1991">{{cite book |first=Daniel |last=Yergin |author-link=Daniel Yergin |title=The Prize: The Epic Quest for Oil, Money, and Power |location=New York |publisher=Simon & Schuster |year=1991 |isbn=978-0-671-50248-5 |pages=[https://archive.org/details/prizeepicquestfo00yerg/page/n500 499]–503|title-link=The Prize: The Epic Quest for Oil, Money, and Power }}</ref>{{rp|499}}<ref>{{cite journal |last=Painter |first=David S. |year=2012 |title= Oil and the American Century |journal=The Journal of American History |volume=99 |issue=1 |page=32 |doi=10.1093/jahist/jas073|doi-access=free }}</ref><ref name="NYT_Martin_19820316"/>— in controlling the price of oil, was dramatically changed. Since 1927, a cartel known as the "Seven Sisters"—five of which were headquartered in the United States—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, according to Yergin.<ref name="Yergin_1991"/>
There were two major energy crisis in the 1970s: the 1973 oil crisis and the 1979 energy crisis that affected the price of oil. Starting in the early 1970s—when domestic production of oil was insufficient to satisfy increasing domestic demands—the US had become increasingly dependent on oil imports from the Middle East.<ref name="Yergin_1991"/> Until the early 1970s, the price of oil in the United States was regulated domestically and indirectly by the Seven Sisters. The "magnitude" of the increase in the price of oil following OPEC's 1973 embargo in reaction to the Yom Kippur War and the 1979 Iranian Revolution, was without precedent.<ref name="JEP_Baumeister_20160101"/>
In the 1973 Yom Kippur War, a coalition of Arab states led by Egypt and Syria attacked Israel.<ref name="Yergin_1991"/>{{rp|570}} During the ensuing 1973 oil crisis, the Arab oil-producing states began to embargo oil shipments to Western Europe and the United States in retaliation for supporting Israel. Countries, including the United States, Germany, Japan,<ref>{{cite journal| doi = 10.2307/2615408| issn = 0020-5850| volume = 56| issue = 2| pages = 263–279| last = Eguchi| first = Yujiro| title = Japanese Energy Policy| journal = International Affairs| date = 1980| jstor = 2615408}}</ref> and Canada<ref name="Budget_1980">{{citation |url=http://www.budget.gc.ca/pdfarch/1980-plan-eng.pdf |title=Budget 1980 |date=28 October 1980 |access-date=27 October 2020 |first=Allan J. |last=MacEachen |location=Ottawa, ON |quote=re introduction of Canada's National Energy Program..."ever since the oil crisis of 1973 industrial countries have had to struggle with the problems of inflation and stubbornly high rates of unemployment. In 1979 the world was shaken by a second major oil shock. For the industrial world this has meant a sharp renewal of inflationary forces and real income losses. For the developing world this second oil shock has been a major tragedy. Their international deficits are now three to four times the sum they receive in aid from the rest of the world.... They are not just Canadian problems. ...they are world-wide problems. At the Venice Summit and at meetings of Finance Ministers of the IMF and OECD, we have seen these new themes emerge."}}</ref> began to establish their own national energy programs that were focused on security of supply of oil,<ref name="Yergin_1991"/>{{rp|607}} as the newly formed Organization of Petroleum Exporting Countries (OPEC) doubled the price of oil.<ref name="Yergin_1991"/>{{rp|607}}
During the 1979 oil crisis, the global oil supply was "constrained" because of the 1979 Iranian Revolution—the price of oil "more than doubled",<ref name="economist_20141209">{{Cite news| issn = 0013-0613| title = Oil gluts, late-1970s style| newspaper = The Economist| access-date = 6 March 2020 |date=9 December 2014| url = https://www.economist.com/news/2014/12/09/oil-gluts-late-1970s-style}}</ref> then began to decline in "real terms from 1980 onwards, eroding OPEC's power over the global economy," according to ''The Economist''.<ref name="economist_20141209"/>
The 1970s oil crisis gave rise to speculative trading and the WTI crude oil futures markets.<ref name="Qiang_201307">{{cite journal| doi = 10.1016/j.apenergy.2013.02.060| issn = 0306-2619| volume = 107| pages = 394–402| last = Zhang| first = Yue-Jun| title = Speculative trading and WTI crude oil futures price movement: An empirical analysis| journal = Applied Energy| access-date = 27 October 2020| date = July 2013| bibcode = 2013ApEn..107..394Z| url = https://linkinghub.elsevier.com/retrieve/pii/S0306261913001785| url-access = subscription}}</ref><ref name="Ji_Qiang_201312">{{cite journal| doi = 10.1016/j.apenergy.2013.03.027| issn = 0306-2619| volume = 112| pages = 1536–1543| last1 = Guo| first1 = Jian-Feng| last2 = Ji| first2 = Qiang| title = How does market concern derived from the Internet affect oil prices?| journal = Applied Energy| access-date = 27 October 2020| date = December 2013| url = https://linkinghub.elsevier.com/retrieve/pii/S0306261913002237| arxiv = 1003.5699| bibcode = 2013ApEn..112.1536G| s2cid = 8674839}}</ref>
In the early 1980s, concurrent with the OPEC embargo, oil prices experienced a "rapid decline."<ref name="NYT_Martin_19820316">{{Cite news| issn = 0362-4331| last = Martin| first = Douglas| title = Opec: Trying to Be a Cartel| newspaper = The New York Times| access-date = 6 March 2020| date =16 March 1982| url = https://www.nytimes.com/1982/03/16/business/opec-trying-to-be-a-cartel.html}}</ref><ref name="WID_Ritchie_20171002"/> In early 2007, the price of oil was US$50. In 1980, globally averaged prices "spiked" to US$107.27,<ref name="WID_Ritchie_20171002"/> and reached its all-time peak of US$147 in July 2008.
The 1980s oil glut was caused by non-OPEC countries—such as the United States and Britain—increasing their oil production, which resulted in a decrease in the price of oil in the early 1980s, according to ''The Economist''.<ref name="economist_20141209"/> When OPEC changed their policy to increase oil supplies in 1985, "oil prices collapsed and remained low for almost two decades", according to a 2015 World Bank report.<ref name="WB_Baffes_201503">{{cite report |title=The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses |first1=John |last1=Baffes |first2=M. Ayhan |last2=Kose |first3=Franziska |last3=Ohnsorge |first4=Marc |last4=Stocker |series=Policy Research Notes (PRNs) |work=World Bank Group |page=61 |url=https://www.worldbank.org/content/dam/Worldbank/Research/PRN01_Mar2015_Oil_Prices.pdf |date=March 2015 |access-date=26 October 2020}}</ref>{{rp|10}}<ref name="worldbank_2009">{{cite report |work=World Bank |title=Global Economic Prospects |date=January 2009}}</ref>
In 1983, the New York Mercantile Exchange (NYMEX) launched crude oil futures contracts, and the London-based International Petroleum Exchange (IPE)—acquired by Intercontinental Exchange (ICE) in 2005— launched theirs in June 1988.<ref name="Petroleum Science_Tian_20191201">{{cite journal| doi = 10.1007/s12182-019-00379-z| issn = 1995-8226| volume = 16| issue = 6| pages = 1493–1505| last1 = Tian| first1 = Hong-Zhi| last2 = Lai| first2 = Wei-Di| title = The causes of stage expansion of WTI/Brent spread| journal = Petroleum Science| date = 1 December 2019| doi-access = free| bibcode = 2019PetSc..16.1493T}}</ref>
The price of oil reached a peak of c. US$65 during the 1990 Persian Gulf crisis and war. The 1990 oil price shock occurred in response to the Iraqi invasion of Kuwait, according to the Brookings Institution.<ref name=Hamilton>{{cite web | title = Causes and consequences of the oil shock of 2007–2008 | url = http://www.brookings.edu/economics/bpea/~/media/Files/Programs/ES/BPEA/2009_spring_bpea_papers/2009_spring_bpea_hamilton.pdf | last1 = Hamilton | first1 = J. | year = 2009 | publisher = Brookings Institution | access-date = 20 January 2016 | archive-url = https://web.archive.org/web/20111114053633/http://www.brookings.edu/economics/bpea/~/media/Files/Programs/ES/BPEA/2009_spring_bpea_papers/2009_spring_bpea_hamilton.pdf | archive-date = 14 November 2011 }}</ref>
There was a period of global recessions and the price of oil hit a low of {{circa|$15}} before it peaked at a high of $45 on 11 September 2001, the day of the September 11 attacks,<ref name="NYT_2008">{{citation |last=Mouawad |first=Jad |date=3 March 2008 |access-date=17 February 2016 |title=Oil Prices Pass Record Set in 1980s, but Then Recede |work=New York Times |url=https://www.nytimes.com/2008/03/03/business/worldbusiness/03cnd-oil.html?hp&_r=0}}</ref> only to drop again to a low of $26 on 8 May 2003.<ref name="CNCB_2016_oilfutures">{{cite web | url=https://www.cnbc.com/2016/02/10/oil-prices-fall-as-us-inventories-hit-record-high-economic-woes-continue.html | title=Oil futures bounce on OPEC deal speculation | publisher=CNCB via Reuters | date=16 February 2016 | access-date=17 February 2016}}</ref>
The price rose to $80 with the U.S.-led invasion of Iraq.
There were major energy crises in the 2000s including the 2010s oil glut with changes in the world oil market. [[File:Oil prices to gas prices graph.png|upright=2|thumb|West Texas Intermediate (WTI) oil prices and gas prices, 1991 to 2017]]
Starting in 1999, the price of oil rose significantly. It was explained by the rising oil demand in countries like China and India.<ref>{{cite news|url=https://www.nytimes.com/2007/11/09/business/worldbusiness/09oil.html|title=Rising Demand for Oil Provokes New Energy Crisis|first=Jad|last=Mouawad|date=9 November 2007|access-date=25 March 2018|newspaper=The New York Times}}</ref> A dramatic increase from US$50 in early 2007, to a peak of US$147 in July 2008, was followed by a decline to US$34 in December 2008, as the 2008 financial crisis took hold.<ref name="AB_Evans_2009">{{cite book| publisher = Alberta Finance and Enterprise| isbn = 978-0-7785-5707-4| last = Evans| first = Iris| title = Building on our strength| location = Edmonton, Alberta| date = 2009}}</ref>{{rp|46}}
By May 2008, The United States was consuming approximately 21 million bpd and importing about 14 million bpd—60% with OPEC supply 16% and Venezuela 10%.<ref name="UPI_Westenskow_20080526">{{Cite news| last = Westenskow| first = Rosalie| title = Analysis: Oil prices pummel U.S. security| work = UPI| access-date = 28 October 2020| date = 26 May 2008| url = https://www.gpsdaily.com/reports/Analysis_Oil_prices_pummel_US_security_999.html}}</ref> During the 2008 financial crisis, the price of oil underwent a significant decrease after the record peak of US$147.27 it reached on 11 July 2008. On 23 December 2008, WTI crude oil spot price fell to US$30.28 a barrel, the lowest since the 2008 financial crisis began. The price sharply rebounded after the crisis and rose to US$82 a barrel in 2009.<ref>{{cite web|url=http://tonto.eia.doe.gov/dnav/pet/hist/rwtcd.htm|title=Cushing, OK WTI Spot Price FOB (Dollars per Barrel)|website=tonto.eia.doe.gov|access-date=25 March 2018}}</ref><ref name="cnbc_2015">{{cite web |url = https://www.cnbc.com/2015/12/07/us-crude-oil-prices-remain-near-7-yr-lows-as-opec-glut-bites.html|title = US oil settles at $37.51 a barrel after hitting 2009 lows|publisher = CNCB via Reuters|date = 8 December 2015|access-date = 17 February 2016}}</ref>
On 31 January 2011, the Brent price hit $100 a barrel briefly for the first time since October 2008, on concerns that the 2011 Egyptian protests would "lead to the closure of the Suez Canal and disrupt oil supplies".<ref name="BBC_2011">{{cite news|url=https://www.bbc.co.uk/news/business-12328745|title=Egypt unrest pushes Brent crude oil to $100 a barrel |work=BBC News|access-date=5 January 2015|date=31 January 2011}}</ref> For about three and half years the price largely remained in the $90–$120 range.
From 2004 to 2014, OPEC was setting the global price of oil.<ref name="Fortune_Tully_20200430">{{Cite news| last = Tully| first = Shawn| title = Buccaneers of the basin: The fall of fracking—and the future of oil| work = Fortune| access-date = 27 October 2020| date = 30 April 2020| url = https://fortune.com/2020/04/30/coronavirus-oil-price-war-fracking-us-shale/}}</ref> OPEC started setting a target price range of $100–110/bbl before the 2008 financial crisis<ref name="WB_Baffes_201503"/>{{rp|10}} —by July 2008 the price of oil had reached its all-time peak of US$147 before it plunged to US$34 in December 2008, during the 2008 financial crisis.<ref name="AB_Evans_2009"/>{{rp|46}} Some commentators including ''Business Week,'' the ''Financial Times'' and the ''Washington Post'', argued that the rise in oil prices prior to the 2008 financial crisis was due to speculation in futures markets.<ref name="Wallace2008">{{cite news |url=https://www.bloomberg.com/bw/stories/2008-06-27/oil-prices-are-all-speculationbusinessweek-business-news-stock-market-and-financial-advice |title=Oil Prices Are All Speculation |first=Ed |last=Wallace |journal=Business Week |date=27 June 2008}}</ref><ref name="ftgateway_2008">{{cite news |url= http://www.ft.com/intl/cms/s/0/b962d938-3716-11dd-bc1c-0000779fd2ac.html#axzz40SbjUYQ2 |archive-url=https://ghostarchive.org/archive/zPKJt |archive-date=11 December 2022 |url-access=subscription |url-status=live |title= CFTC in talks to plug the 'London loophole' |access-date=11 June 2008 |newspaper= The Financial Times |date= 10 June 2008 }}</ref><ref name="washingtonpost_2008">{{cite news |url= https://www.washingtonpost.com/wp-dyn/content/article/2008/05/29/AR2008052903627.html |title= Probe of Crude Oil Trading Disclosed |access-date=11 June 2008 |newspaper= Washington Post |date= 30 May 2008| first=Steven| last=Mufson}}</ref><ref name="money_2008">{{cite web|url=https://money.cnn.com/2008/05/29/markets/oil_markets_investigation.ap/index.htm?postversion=2008052913 |title=Government investigates oil markets |access-date=11 June 2008 |website=CNN Money |date=30 May 2008 |archive-url=https://web.archive.org/web/20080601035046/http://money.cnn.com/2008/05/29/markets/oil_markets_investigation.ap/index.htm?postversion=2008052913 |archive-date=1 June 2008 }}</ref><ref name="CFTC_2008">{{cite web |url= http://www.cftc.gov/newsroom/generalpressreleases/2008/pr5503-08.html |title= CFTC Announces Multiple Energy Market Initiatives |publisher= CFTC. Release: 5503-08 |date= 29 May 2008 |archive-url = https://web.archive.org/web/20080601035005/http://www.cftc.gov/newsroom/generalpressreleases/2008/pr5503-08.html <!-- Bot retrieved archive --> |archive-date=1 June 2008|access-date=1 June 2008}}</ref><ref name="WTRG_Williams_nd">{{cite web |url=http://www.wtrg.com/prices.htm |title=History and Analysis of Crude Oil Prices |first=James L. |last=Williams |work=WTRG Economics |location=London, Arkansas |date=n.d. |access-date=6 March 2020 |archive-url=https://web.archive.org/web/20080102043155/http://www.wtrg.com/prices.htm |archive-date=2 January 2008 }}</ref>
Up until 2014, the dominant factor on the price of oil was from the demand side—from "China and other emerging economies".<ref name="WSJ_Yergin_20141130"/><ref name="macroeconomics_Ratti_20160901">{{cite journal| doi = 10.1016/j.eneco.2016.06.002| issn = 0140-9883| volume = 59| pages = 198–212| last1 = Ratti| first1 = Ronald A.| last2 = Vespignani| first2 = Joaquin L.| title = Oil prices and global factor macroeconomic variables| journal = Energy Economics| date = 1 September 2016| doi-access = free| bibcode = 2016EneEc..59..198R}}</ref>
By 2014, production from unconventional reservoirs through hydraulic fracturing in the United States and oil production in Canada, caused oil production to surge globally "on a scale that most oil exporters had not anticipated" resulting in "turmoil in prices."<ref name="WSJ_Yergin_20141130">{{Cite news| last = Yergin| first = Daniel| title = The Global Shakeout From Plunging Oil| work = Wall Street Journal| date = 30 November 2014 |access-date=26 October 2020 |url=https://www.wsj.com/articles/daniel-yergin-the-global-shakeout-from-plunging-oil-1417386897}}</ref> The United States oil production was greater than that of Russia and Saudi Arabia, and according to some, broke OPEC's control of the price of oil.<ref name="Fortune_Tully_20200430"/> In the middle of 2014, price started declining due to a significant increase in oil production in USA, and declining demand in the emerging countries.<ref>{{cite news|url=https://www.wsj.com/articles/oil-prices-hit-again-by-weak-china-data-buildup-in-u-s-stockpiles-1420019256|title=U.S. Oil Falls 46%, Steepest Yearly Loss Since 2008 |first=Nicole|last=Friedman|date=31 December 2014|work=The Wall Street Journal |access-date=5 January 2015}}</ref> According to Ambrose Evans-Pritchard, in 2014–2015, Saudi Arabia flooded the market with inexpensive crude oil in a failed attempted to slow down US shale oil production, and caused a "positive supply shock" which saved consumers about US$2 trillion and "benefited the world economy".<ref name="telegraph_EvansPritchard_20200309"/>
During 2014–2015, OPEC members consistently exceeded their production ceiling, and China experienced a marked slowdown in economic growth. At the same time, U.S. oil production nearly doubled from 2008 levels, due to substantial improvements in shale "fracking" technology in response to record oil prices. A combination of factors led a plunge in U.S. oil import requirements and a record high volume of worldwide oil inventories in storage, and a collapse in oil prices that continues into 2016.<ref name="NYT_2014">{{cite news |title=U.S. Oil Prices Fall Below $80 a Barrel |first=Clifford |last=Krassnov |date=3 November 2014 |access-date=13 December 2014 |url=https://www.nytimes.com/2014/11/04/business/energy-environment/us-oil-prices-fall-below-80-a-barrel.html |newspaper=The New York Times}}</ref><ref name=glut>{{cite news |url=https://www.bloomberg.com/news/articles/2015-12-04/opec-maintains-crude-production-as-group-defers-output-target-ihryzilb |title=OPEC Won't Cut Production to Stop Oil's Slump |publisher=Bloomberg News |date=4 December 2015}}</ref> Between June 2014 and January 2015, according to the World Bank, the collapse in the price of oil was the third largest since 1986.<ref name="OIES+Bassam_2016">{{cite journal |last=Fattouh |first=Bassam |date=2016 |title=Adjustment in the Oil Market: Structural, Cyclical or Both?|url=https://www.oxfordenergy.org/publications/adjustment-oil-market-structural-cyclical/|journal=Oxford Energy Comment |publisher=Oxford Institute for Energy Studies |page=23 |access-date=26 October 2020}}</ref>
In early 2015, the US oil price fell below $50 per barrel dragging Brent oil to just below $50 as well.<ref name="BBC_below_50">{{citation|title=US oil price falls below $50 on supply glut fears|work=BBC News |date=5 January 2015 |url=https://www.bbc.com/news/business-30687669}}</ref>
The 2010s oil glut—caused by multiple factors—spurred a sharp downward spiral in the price of oil that continued through February 2016.<ref name="telegraph_2015">{{cite news|first1= Ambrose |last1=Evans-Pritchard |title= Goldman eyes $20 oil as glut overwhelms storage sites |url=https://www.telegraph.co.uk/finance/oilprices/12006554/Goldman-eyes-20-oil-as-glut-overwhelms-storage-sites.html |archive-url=https://ghostarchive.org/archive/20220112/https://www.telegraph.co.uk/finance/oilprices/12006554/Goldman-eyes-20-oil-as-glut-overwhelms-storage-sites.html |archive-date=12 January 2022 |url-access=subscription |url-status=live |access-date=29 December 2015|newspaper=The Telegraph |date=29 December 2015}}{{cbignore}}</ref> By 3 February 2016 oil was below $30—<ref name="calgaryherald_feb_3_2016_">{{citation | title=Commodities | work=Calgary Herald | date=3 February 2016 |page=C7}}</ref> a drop of "almost 75% since mid-2014 as competing producers pumped 1–2 million barrels of crude daily exceeding demand, just as China's economy hit lowest growth in a generation."<ref name="CNCB_2016_oilfutures" /> The North Sea oil and gas industry was financially stressed by the reduced oil prices, and called for government support in May 2016.<ref>Mark Lammey. "[https://www.energyvoice.com/oilandgas/110611/north-sea-industry-heading-lehman-brothers-magnitude-crash/ North Sea industry heading for Lehman Brothers magnitude crash]". 27 May 2016.</ref> According to 15 February 2016 report by Deloitte LLP—the audit and consulting firm—with global crude oil at near ten-year low prices, 35% of listed E&P oil and gas companies are at a high risk of bankruptcy worldwide.<ref name="G&M_Deloitte_2016">{{citation |work=Globe and Mail via PressReader |date=6 February 2016 |title=Deloitte warns of oil bankruptcies}}</ref><ref name="reuters_2016_Feb16">{{cite news | url=https://www.reuters.com/article/us-usa-shale-bankruptcy-idUSKCN0VP0O6 | title=High risk of bankruptcy for one-third of oil firms: Deloitte | work=Reuters | date=16 February 2016 | access-date=17 February 2016 | author=Scheyder, Ernest | location=Houston}}</ref> Bankruptcies "in the oil and gas industry could surpass levels seen in the Great Recession."<ref name="G&M_Deloitte_2016" /><ref name="fortune_2016" />
The global average price of oil dropped to US$43.73 per barrel in 2016.<ref name="WID_Ritchie_20171002"/>
By December 2018, OPEC members controlled approximately 72% of total world proved oil reserves, and produced about 41% of the total global crude oil supply.<ref name="IEA_OilPrices_2020">{{cite report |title=Oil prices and outlook |work=U.S. Energy Information Administration (EIA)| access-date = 27 October 2020| url = https://www.eia.gov/energyexplained/oil-and-petroleum-products/prices-and-outlook.php |date=2020}}</ref> In June 2018, OPEC reduced production.<ref name="theguardian _Vaughan_20181112"/> In late September and early October 2018, the price of oil rose to a four-year high of over $80 for the benchmark Brent crude<ref name="theguardian _Vaughan_20181112">{{Cite news| issn = 0261-3077| last = Vaughan| first = Adam| title = Oil prices rise as Saudi Arabia signals production cut| work = The Guardian| access-date = 12 January 2019| date = 12 November 2018| url = https://www.theguardian.com/business/2018/nov/12/oil-prices-saudi-arabia-production-opec-khalid-al-falih}}</ref> in response to concerns about constraints on global supply. The production capacity in Venezuela had decreased. United States sanctions against Iran, OPEC's third-biggest oil producer, were set to be restored and tightened in November.<ref name="economist_20180929_oil">{{Cite news| issn = 0013-0613| title = Rising oil prices catch emerging economies at a vulnerable moment| newspaper = The Economist| access-date = 12 January 2019| date = 29 September 2018| url = https://www.economist.com/finance-and-economics/2018/09/29/rising-oil-prices-catch-emerging-economies-at-a-vulnerable-moment}}</ref>
The price of oil dropped in November 2018 because of a number of factors, including "rising petro-nations' oil production, the U.S. shale oil boom, and swelling North American oil inventories," according to ''Market Watch''.<ref name="marketwatch_ Saefong_20181116">{{cite news|url=https://www.marketwatch.com/story/oil-begins-month-on-downbeat-note-after-october-rout-2018-11-01 |title=Oil prices suffer sixth weekly loss in a row |first1=Myra P. |last1=Saefong |first2=Rachel Koning |last2=Beals |work=Market Watch |date=16 November 2018 |quote="Rising petro-nations' oil production, the U.S. shale oil boom, swelling North American oil inventories and, not least, too high oil prices curbing emerging market oil demand growth were the factors which calmed the bullish market mood" in October, pulling the price of Brent from above $85 a barrel to below $75," said Norbert Ruecker, head of macro and commodity research at Julius Baer, in a note.}}</ref>
{{clear left}} [[File:Brent Spot monthly.svg|thumb|upright=2|Brent barrel petroleum spot prices from May 1987 to 2016, in United States dollars (USD)]]The 1 November 2018 U.S. Energy Information Administration (EIA) report announced that the US had become the "leading crude oil producer in the world" when it hit a production level of 11.3 million barrels per day (bpd) in August 2018, mainly because of its shale oil production.<ref name="EIA_20181101">{{cite web| title = U.S. monthly crude oil production exceeds 11 million barrels per day in August |series=Today in Energy |work= U.S. Energy Information Administration (EIA)| access-date =12 January 2019 |date=1 November 2018| url = https://www.eia.gov/todayinenergy/detail.php }}</ref> US exports of petroleum—crude oil and products—exceeded imports in September and October 2019, "for the first time on record, based on monthly values since 1973."<ref name="EIA_French_20200107"/>
When the price of Brent oil dropped rapidly in November 2018 to $58.71,<ref name="marketwatch_ Saefong_20181130"/> more than 30% from its peak,<ref name="CNN_Egan_2018121">{{cite web| series = Business| first = Matt |last=Egan| title = The Great Oil Crash of 2018: What's really going on| work = CNN| access-date = 12 January 2019 |date=21 November 2018| url = https://www.cnn.com/2018/11/21/investing/oil-prices-trump-saudi-arabia/index.html}}</ref>—the biggest 30-day drop since 2008—factors included increased oil production in Russia, some OPEC countries and the United States, which deepened global over supply.<ref name="marketwatch_ Saefong_20181130">{{cite news|url=https://www.marketwatch.com/story/oil-slips-back-toward-50-ahead-of-looming-g-20-opec-production-talks-2018-11-30 |title=Oil prices drop 22% in November for biggest monthly loss in a decade |first1=Myra P. |last1=Saefong |first2=Rachel Koning |last2=Beals |work=Market Watch |date=30 November 2018 | access-date = 12 January 2019}}</ref>
In 2019 the average price of Brent crude oil in 2019 was $64, WTI crude oil was $57,<ref name="EIA_French_20200107"/> the OPEC Reference Basket (ORB) of 14 crudes was $59.48 a barrel.<ref name="OPEC_20190110">{{cite web| work = OPEC | title=OPEC daily basket price stood at $59.48 a barrel |date=10 January 2019|location=Vienna, Austria| url = https://www.opec.org/opec_web/en/press_room/5348.htm| access-date = 12 January 2019 |quote=The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Djeno (Congo), Oriente (Ecuador), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).}}</ref>
[[File:WTI price 2019-2020.png|thumb|upright=1.5|Movement of WTI price from January 2019 to June 2020. The crash started in mid-February 2020.]]
On 8 March 2020, global oil prices fell precipitously when Saudi Arabia announced unexpected price cuts at the onset of the COVID-19 recession. In the face of cratering demand Russia responded in kind, resulting in a sudden price war.<ref name="Kellogg"/> The resulting low prices represented a threat to the fiscal health of oil-exporting countries.<ref name="OECD_20200930">{{cite report |date=30 September 2020 |title=The impact of Coronavirus (COVID-19) and the global oil price shock on the fiscal position of oil-exporting developing countries| url = https://read.oecd-ilibrary.org/view/?ref=136_136801-aw9nps8afk&title=The-impact-of-Coronavirus-COVID-19-and-the-global-oil-price-shock-on-the-fiscal-position-of-oil-exporting-developing-countries}}</ref> The IHS Market reported that the "COVID-19 demand shock" represented a bigger contraction than that experienced during the Great Recession during the late 2000s and early 2010s.<ref name="telegraph_EvansPritchard_20200309">{{Cite news| issn = 0307-1235| last = Evans-Pritchard| first = Ambrose| title = Coronavirus may be more destructive than the Lehman crisis| work = The Telegraph| access-date = 10 March 2020| date = 9 March 2020| url = https://www.telegraph.co.uk/business/2020/03/09/coronavirus-may-destructive-lehman-crisis/}}</ref>
As demand for oil dropped to 4.5m million bpd below forecasts, tensions rose between OPEC members.<ref name="telegraph_EvansPritchard_20200309"/> At a 6 March OPEC meeting in Vienna, major oil producers were unable to agree on reducing oil production in response to the global COVID-19 pandemic.<ref name="NYT_20200306">{{Cite news| issn = 0362-4331| title = Stocks Fall and Bond Yields Sink: Live Updates| work = The New York Times| access-date = 6 March 2020| date = 6 March 2020| url = https://www.nytimes.com/2020/03/06/business/stock-markets-today.html}}</ref> The spot price of WTI benchmark crude oil on the NYM on 6 March 2020 dropped to US$42.10 per barrel.<ref name="businessinsider_20200306">{{cite web| title = Crude Oil Price Today |first=Theron |last=Mohamed| series=Markets: oil price per barrel | work = Business Insider| access-date = 6 March 2020| date = 6 March 2020| url = https://markets.businessinsider.com/commodities/oil-price?type=wti}}</ref>
On 8 March, the 2020 Russia–Saudi Arabia oil price war was launched, in which Saudi Arabia and Russia briefly flooded the market, also contributed to the decline in global oil prices.<ref>{{cite news |last1=Blas |first1=J. |first2=E. |last2=Pismennaya |date=1 April 2020 |title=Saudis Boost Oil Output, Defying Trump's Plea To End Price War |url=https://www.bloomberg.com/news/articles/2020-04-01/saudi-arabia-resists-trump-s-attempt-to-broker-an-oil-war-truce |access-date=27 October 2020}}</ref> Later on the same day, oil prices had decreased by 30%, representing the largest one-time drop since the 1991 Gulf War.<ref name="WaPo_Long_20200309">{{Cite news |last=Long |first=Heather |date=9 March 2020 |title=The markets are sending a message about coronavirus: The recession risk is real |newspaper=Washington Post |url=https://www.washingtonpost.com/business/2020/03/09/coronavirus-stock-market-oil-trump/ |access-date=9 March 2020}}</ref> Oil traded at about $30 a barrel.<ref name="WaPo_Long_20200309"/> Very few energy companies can produce oil when the price of oil is this low. Saudi Arabia, Iran, and Iraq had the lowest production costs in 2016, while the United Kingdom, Brazil, Nigeria, Venezuela, and Canada had the highest.<ref name="WSJ_20160415"/> On 9 April, Saudi Arabia and Russia agreed to oil production cuts.<ref>{{cite news |title=Saudi Arabia and Russia Reach Deal to Cut Oil Production |url=https://foreignpolicy.com/2020/04/10/saudi-arabia-russia-deal-cut-oil-production/ |work=Foreign Policy |date=10 April 2020}}</ref><ref>{{cite news |title=Saudi, Russia agree oil cuts extension, raise pressure for compliance |url=https://www.reuters.com/article/us-oil-opec/saudi-russia-agree-oil-cuts-extension-raise-pressure-for-compliance-idUSKBN23A1OU |work=Reuters |date=3 June 2020}}</ref>
By April 2020 the price of WTI dropped by 80%, down to a low of about $5.<ref name="NYT_Krauss_20200331">{{Cite news |last=Krauss |first=Clifford |date=31 March 2020 |title=Oil Companies on Tumbling Prices: 'Disastrous, Devastating' |work=The New York Times |url=https://www.nytimes.com/2020/03/31/business/energy-environment/crude-oil-companies-coronavirus.html |access-date=1 April 2020}}</ref> As the demand for fuel decreased globally with pandemic-related lockdowns preventing travel,<ref name="BBC_20200420">{{Cite news| title = US oil prices turn negative as demand dries up| work = BBC News| access-date = 26 October 2020| date = 20 April 2020| url = https://www.bbc.com/news/business-52350082}}</ref> and due to excessive demand for storage of the large surplus in production, the price for future delivery of US crude in May became negative on 20 April 2020, the first time to happen since the New York Mercantile Exchange began trading in 1983.<ref>{{cite web|url=https://www.cnn.com/2020/04/20/business/oil-price-crash-bankruptcy/index.html|title=Hundreds of US oil companies could go bankrupt|first=Matt|last=Egan|website=CNN Business|publisher=CNN|date=20 April 2020 }}</ref><ref>{{cite news|url=https://www.nytimes.com/2020/04/20/business/stock-market-live-trading-coronavirus.html|title=U.S. Oil Prices Plunge Into Negative Territory|newspaper=The New York Times |date=30 July 2020}}</ref> In April, as the demand decreased, concerns about inadequate storage capacity resulted in oil firms "renting tankers to store the surplus supply".<ref name="BBC_20200420"/> An October ''Bloomberg'' report on slumping oil prices—citing the EIA among others—said that, with the increasing number of virus cases, the demand for gasoline—particularly in the United States—was "particularly worrisome", while global inventories remained "quite high".<ref name="Bloomberg_Rigzone_20201021">{{Cite news| last = Luz| first = Andres Guerra| title = Oil Prices Slump on US Fuel Supply Build| work = Bloomberg Rigzone| access-date = 26 October 2020| date = 21 October 2020| url = https://www.rigzone.com/news/wire/oil_prices_slump_on_us_fuel_supply_build-21-oct-2020-163630-article/}}</ref>
With the price of WTI at a record low, and 2019 Chinese 5% import tariff on U.S. oil lifted by China in May 2020, China began to import large quantities of US crude oil, reaching a record high of 867,000 bpd in July.<ref name="Forbes_Eberhart_20200920">{{cite web| last = Eberhart| first = Dan| title = Why China Is Suddenly Buying Record Amounts Of American Crude Oil| work = Forbes |date=20 September 2020| access-date = 27 October 2020| url = https://www.forbes.com/sites/daneberhart/2020/09/20/china-increases-imports-of-us-oil-ahead-of-november-election/}}</ref>
In a January 2020 EIA report, the average price of Brent crude oil in 2019 was $64 per barrel compared to $71 per barrel in 2018. The average price of WTI crude oil was $57 per barrel in 2019 compared to $64 in 2018.<ref name="EIA_French_20200107">{{Cite report|first=Matt |last=French| title = Crude oil prices were generally lower in 2019 than in 2018 |series=Today in Energy |work=U.S. Energy Information Administration (EIA) | access-date = 6 March 2020| date = 7 January 2020| url = https://www.eia.gov/todayinenergy/detail.php?id=42415}}</ref> On 20 April 2020, WTI Crude futures contracts dropped below $0 for the first time in history,<ref>{{cite web |title=Oil Price Charts |url=https://oilprice.com/oil-price-charts |website=OilPrice.com |access-date=21 April 2020 |language=en}}</ref> and the following day Brent Crude fell below $20 per barrel. The substantial decrease in the price of oil was caused by two main factors: the 2020 Russia–Saudi Arabia oil price war<ref name="Kellogg">{{Cite news| title = We Should Be Celebrating OPEC's Price War, Not Trying To End It |work=Forbes |first=Ryan |last=Kellogg |date=3 April 2020| access-date = 4 April 2020| url = https://www.forbes.com/sites/ucenergy/2020/04/03/we-should-be-celebrating-opecs-price-war-not-trying-to-end-it/#4388e4313b66}}</ref> and the COVID-19 pandemic, which lowered demand for oil because of lockdowns around the world.<ref name="Kellogg"/>
In the fall of 2020, against the backdrop of the resurgent pandemic, the U.S. Energy Information Administration (EIA) reported that global oil inventories remained "quite high" while demand for gasoline—particularly in the United States—was "particularly worrisome."<ref name="Bloomberg_Rigzone_20201021"/> The price of oil was about US$40 by mid-October.<ref>{{cite web |title=Oil Market Report - October 2020 – Analysis |url=https://www.iea.org/reports/oil-market-report-october-2020 |website=IEA |date=14 October 2020 |access-date=19 January 2022}}</ref> In 2021, the record-high energy prices were driven by a global surge in demand as the world quit the economic recession caused by COVID-19, particularly due to strong energy demand in Asia.<ref name="Al-Jazeera"/><ref name="CNBC"/><ref>{{cite news |title=U.S. crude oil price tops $80 a barrel, the highest since 2014 |url=https://www.cnbc.com/2021/10/08/us-crude-oil-price-tops-80-a-barrel-the-highest-since-2014.html |work=CNBC |date=8 October 2021}}</ref>
The ongoing 2019–2021 Persian Gulf crisis, which includes the use of drones to attack Saudi Arabia's oil infrastructure, has made the Gulf states aware of their vulnerability. Former US President "Donald Trump's 'maximum pressure' campaign led Iran to sabotage oil tankers in the Persian Gulf and supply drones and missiles for a surprise strike on Saudi oil facilities in 2019."<ref>{{Cite news| issn = 0013-0613| title = Middle Eastern foes are giving diplomacy a shot| newspaper = The Economist| access-date = 19 January 2022| date = 16 September 2021| url = https://www.economist.com/middle-east-and-africa/2021/09/16/middle-eastern-foes-are-giving-diplomacy-a-shot}}</ref> In January 2022, Yemen's Houthi rebels drone attacks destroyed oil tankers in Abu Dhabi prompting concerns about further increases in the price of oil.<ref>{{cite web| title = Saudi-led coalition air strikes target Yemen's Houthi rebels after Abu Dhabi attack| work = France 24| access-date = 19 January 2022| date = 17 January 2022| url = https://www.france24.com/en/middle-east/20220117-saudi-led-coalition-strikes-target-yemen-s-houthi-rebels-after-abu-dhabi-attack}}</ref>
The oil prices were seen rising to hit $71.38 per barrel in March 2021, marking the highest since the beginning of the pandemic in January 2020.<ref>{{cite web|url=https://www.reuters.com/article/us-global-oil/brent-hits-70-for-first-time-since-pandemic-began-after-saudi-attack-idUSKBN2B001J?rpc=401&|title=Brent hits $70 for first time since pandemic began after Saudi attack|access-date=7 March 2021|website=Reuters}}</ref> The oil price rise followed a missile drone attack on Saudi Arabia's Aramco oil facility by Yemen's Houthi rebels.<ref>{{cite news|url=https://www.washingtonpost.com/world/the_americas/saudi-houthi-attack-ras-tanura-aramco/2021/03/07/77f29148-7f72-11eb-9ca6-54e187ee4939_story.html|title=Houthis strike Saudi oil giant's facilities in the kingdom's east|access-date=7 March 2021|newspaper=The Washington Post}}</ref> The United States said it was committed to defending Saudi Arabia.<ref>{{cite web|url=https://www.bnnbloomberg.ca/u-s-vows-to-defend-saudi-arabia-after-attack-on-key-oil-site-1.1573846|title=U.S. Vows to Defend Saudi Arabia After Attack on Key Oil Site|access-date=8 March 2021|website=BNN Bloomberg|date=8 March 2021 }}</ref>
On 5 October 2021, crude oil prices reached a multiyear high but retreated by 2% the following day. The price of crude was on the rise since June 2021, after a statement by a top US diplomat that even with a nuclear deal with Iran, hundreds of economic sanctions would remain in place.<ref>[https://www.reuters.com/business/energy/oil-falls-again-amid-concerns-over-demand-rebound-2021-06-08/ "Oil rises as Iranian supply not seen returning soon"] ''Reuters''. Retrieved 6 October 2021.</ref> Since September 2021, Europe's energy crisis has been worsening, driven by high crude prices and a scarcity of Russian gas on the continent.<ref>[https://www.cnbc.com/2021/09/16/europes-energy-crisis-is-making-the-market-nervous-ahead-of-winter.html "Europe's energy crisis is making the market nervous. And analysts expect record-high prices to persist"] ''cnbc''. Retrieved 6 October 2021.</ref>
The high price of oil in late 2021, which resulted in US gasoline pump prices that rose by over $1 a gallon—a seven-year high—added pressure to the United States, which has extensive reserves of oil and has been one of the world's largest producers of oil since at least 2018.<ref name="Forbes Eberhart 2021">{{cite web| last = Eberhart| first = Dan| title = Why Are Oil Prices So High When The U.S. Remains One Of The World's Largest Producers?| work = Forbes| access-date = 19 January 2022 |date=13 November 2021| url = https://www.forbes.com/sites/daneberhart/2021/11/13/why-are-oil-prices-so-high-when-the-us-remains-one-of-the-worlds-largest-producers/}}</ref> One of the major factors in the US refraining from increased oil production is related to "investor demands for higher financial returns".<ref name="Forbes Eberhart 2021"/> Another factor as described by Forbes, is 'backwardation'—when oil futures markets see the current price of $85+ as higher than what they can anticipate in the months and years in the future. If investors perceive lower future prices, they will not invest in "new drilling and fracking."<ref name="Forbes Eberhart 2021"/>
thumb|upright=1.5|The start price, end price, highs and lows of WTI oil prices for each year of the decade By mid-January 2022, ''Reuters'' raised concerns that an increase in the price of oil to $100—which seemed to be imminent—would worsen the inflationary environment that was already breaking 30-year-old records.<ref name="Reuters_20220119">{{Cite news| last = Ranasinghe| first = Dhara| title = Analysis: As inflation breaks records, $100 oil is also looming| work = Reuters| access-date = 2 July 2022 | date=20 January 2022| url = https://www.reuters.com/markets/europe/inflation-breaks-records-100-oil-is-also-looming-2022-01-19/}}</ref> Central banks were concerned that higher energy prices would contribute to a "wage-price spiral." The European Union (EU) embargo of Russian seaborne oil, in response to the Russian invasion of Ukraine in February, 2022, was one—but not the only—factor in the increase in the global price of oil, according to ''The Economist''.<ref name="Economist_202205">{{Cite news| issn = 0013-0613| title = Why the oil price is spiking again| newspaper = The Economist| access-date = 2 July 2022 | date = 31 May 2022| url = https://www.economist.com/finance-and-economics/2022/05/31/why-the-oil-price-is-spiking-again}} Updated 13 June 2022</ref>
When the EU added new restrictions to Russia's oil on May 30, there was a dramatic increase in the price of Brent crude to over $120 a barrel.<ref name="Economist_202205"/> Other factors affecting the surge in the price of oil included the tight oil market combined with a "robust demand" for energy as travel increased following the easing of coronavirus restrictions.<ref name="Economist_202205"/> At the same time, the United States was experiencing decreased refinery capacity which led to higher prices for petrol and diesel.<ref name="Economist_202205"/>
In an effort to lower energy prices and to curb inflation, President Biden announced on March 31, 2022, that he would be releasing a million bbl/d from the Strategic Petroleum Reserve (SPR).<ref name="Puko_Ferek_20220331">{{cite news |first1 = Timothy |last1 = Puko |first2 = Katy Stech |last2 = Ferek |url = https://www.wsj.com/articles/why-is-biden-tapping-the-strategic-oil-reserve-and-will-that-lower-gas-prices-11637680300 |title = Why Is Biden Tapping the Strategic Oil Reserve, and Will That Lower Gas Prices? |work = The Wall Street Journal |date = 31 March 2022 }}</ref><ref name="Krauss_20220401">{{cite news |last1=Krauss |first1=Clifford |last2=Shear |first2=Michael D. |url=https://www.nytimes.com/2022/03/31/business/energy-environment/biden-oil-strategic-petroleum-reserve.html |title=Biden will tap oil reserve, hoping to push gasoline prices down |work=The New York Times |date=April 1, 2022 |page=A1}}</ref> Bloomberg described how the price of oil, gas and other commodities had risen driven by a global "resurgence in demand" as COVID-19 restrictions were eased, combined with supply chains problems, and "geopolitical tensions".<ref name="Bloomberg_20220224"/>
In March 2023, oil prices dropped over $2 a barrel on the 14th following the Collapse of Silicon Valley Bank. The bank's collapse sent a tremor through various financial sectors, from banking to the oil industry.<ref>{{cite news |last1=Nasralla |first1=Shadia |url=https://www.reuters.com/business/energy/oil-prices-edge-lower-svb-collapse-spooks-financial-markets-2023-03-14/ |title=Oil prices continue slump in fallout from SVB shutdown |work=Reuters |date=March 14, 2023}}</ref>
In May 2024, Chuck Schumer, along with 22 other Democrats, urged the Department of Justice to take robust action against alleged collusion and price-fixing in the oil industry. In a letter to Merrick Garland, the senators referenced a FTC investigation revealing price-fixing by oil executives, which had increased energy costs for Americans. The FTC found that Scott D. Sheffield, colluded with OPEC to raise crude oil prices. Although the FTC cleared Exxon Mobil's $60 billion acquisition of Pioneer, it barred Sheffield from joining the new company's board. The senators called for a comprehensive DOJ investigation into potential Sherman Antitrust Act violations, citing concerns over national security and economic burdens on lower-income families due to inflated fuel costs.<ref>{{cite news|last=DALY |first=MATTHEW |title=Democrats urge Justice Department to prosecute alleged collusion and price-fixing by oil industry |date=30 May 2024 |url=https://apnews.com/article/schumer-democrats-big-oil-price-fixing-collusion-07a8583a2b12e645d2860608c626cc7c |archive-url=https://web.archive.org/web/20240530112812/https://apnews.com/article/schumer-democrats-big-oil-price-fixing-collusion-07a8583a2b12e645d2860608c626cc7c |archive-date=30 May 2024 |access-date=30 May 2024}}</ref>
On 10 October 2024, oil prices surged over 3% due to escalating tensions in the Middle East, raising concerns about potential disruptions to crude supplies. Brent crude reached $75.98 per barrel, and U.S. WTI climbed to $72.30. Fears of retaliatory strikes on oil facilities and possible U.S. involvement grew, while OPEC+ ministers met without expected changes to production policies.<ref>{{Cite news |date=2 October 2024 |title=Oil prices jump more than 3% as Middle East tensions escalate|newspaper=Reuters|url=https://www.reuters.com/markets/commodities/oil-prices-rise-more-than-1-escalating-tensions-middle-east-2024-10-01/|access-date=2 October 2024}}</ref>
On 13 January 2026, oil prices rose by over 2% due to potential disruptions to Iranian crude oil exports overshadowing increased supply from Venezuela.<ref>{{Cite web |last=Meredith |first=Sam |date=2026-01-13 |title=Iran’s regime in its ‘final days and weeks' after mass protests, Germany’s Merz says |url=https://www.cnbc.com/2026/01/13/iran-protests-inflation-trump-germany-merz.html |access-date=2026-01-14 |website=CNBC |language=en}}</ref> This came after President Donald Trump cancelled all meetings with Iranian officials and pledged support to protesters of anti-government demonstrations in Iran.<ref>{{Cite news |last=Lamb |first=Kate |date=2026-01-14 |title=Iran protests: what we know so far about the spiralling anti-government demonstrations |url=https://www.theguardian.com/world/2026/jan/14/iran-protests-what-we-know-so-far-about-the-the-spiralling-anti-government-protests |access-date=2026-01-14 |work=The Guardian |language=en-GB |issn=0261-3077}}</ref>
==Oil-storage trade (contango)== {{main|Oil-storage trade}}
[[File:Bateaux comparaison3.png|thumb|upright=1.8|The Knock Nevis (1979–2010, used for floating storage in 2004–2009), a ULCC supertanker compared to the longest ships ever built]]
The oil-storage trade, also referred to as contango, a market strategy in which large, often vertically integrated oil companies purchase oil for immediate delivery and storage—when the price of oil is low— and hold it in storage until the price of oil increases. Investors bet on the future of oil prices through a financial instrument, oil futures in which they agree on a contract basis, to buy or sell oil at a set date in the future. Crude oil is stored in salt mines, tanks and oil tankers.<ref name="oil_glut" />
Investors can choose to take profits or losses prior to the oil-delivery date arrives. Or they can leave the contract in place and physical oil is "delivered on the set date" to an "officially designated delivery point", in the United States, that is usually Cushing, Oklahoma. When delivery dates approach, they close out existing contracts and sell new ones for future delivery of the same oil. The oil never moves out of storage. If the forward market is in "contango"—the forward price is higher than the current spot price—the strategy is very successful.
Scandinavian Tank Storage AB and its founder Lars Jacobsson introduced the concept on the market in early 1990.<ref name="Yglesias_2014">{{citation |title=Why speculators are stashing vast quantities of crude oil on tanker ships |first=Matthew |last=Yglesias |date=25 December 2014 |access-date=21 January 2015 |url=https://www.vox.com/2014/12/25/7443569/contango-oil-storage |work=VOX}}</ref> But it was in 2007 through 2009 the oil storage trade expanded,<ref name=NPR>{{cite web|first=Michele|last=Norris|date=17 December 2008|title=Contango In Oil Markets Explained|website=NPR.org |url=https://www.npr.org/templates/story/story.php?storyId=98410267}}</ref> with many participants—including Wall Street giants, such as Morgan Stanley, Goldman Sachs, and Citicorp—turning sizeable profits simply by sitting on tanks of oil.<ref name=WSJ6oct2007>{{cite news|title=Where Has All The Oil Gone? After Sitting on Crude, speculators Unload It. The World's Eyes Fall on Cushing, Oklahoma|url=https://www.wsj.com/articles/SB119162309507450611|journal=Wall Street Journal|date=6 October 2007|first=Anne|last=Davis}}</ref> By May 2007 Cushing's inventory fell by nearly 35% as the oil-storage trade heated up.<ref name="WSJ6oct2007"/>
By the end of October 2009 one in twelve of the largest oil tankers was being used more for temporary storage of oil, rather than transportation.<ref name=FT2009>{{cite journal|date=17 November 2009|title=Tankers store oil as futures prices rocket|first=Robert |last=Wright|journal=Financial Times|url=https://www.ft.com/content/29a6663e-d3af-11de-8caf-00144feabdc0 |archive-url=https://ghostarchive.org/archive/FyBSL |archive-date=11 December 2022 |url-access=subscription |url-status=live|location=London, UK}}</ref>
From June 2014 to January 2015, as the price of oil dropped 60% and the supply of oil remained high, the world's largest traders in crude oil purchased at least 25 million barrels to store in supertankers to make a profit in the future when prices rise. Trafigura, Vitol, Gunvor, Koch, Shell and other major energy companies began to book oil storage supertankers for up to 12 months. By 13 January 2015 At least 11 Very Large Crude Carriers (VLCC) and Ultra Large Crude Carriers (ULCC)" have been reported as booked with storage options, rising from around five vessels at the end of last week. Each VLCC can hold 2 million barrels."<ref name="Reuters_2015">{{cite news |url=https://www.cnbc.com/2015/01/13/oil-traders-to-store-millions-of-barrels-at-sea-as-prices-slump.html |title=Oil traders to store millions of barrels at sea as prices slump |date=13 January 2015 |agency=Reuters |access-date=20 January 2015}}</ref>
In 2015 as global capacity for oil storage was out-paced by global oil production, and an oil glut occurred. Crude oil storage space became a tradable commodity with CME Group— which owns NYMEX— offering oil-storage futures contracts in March 2015.<ref name="oil_glut" /> Traders and producers can buy and sell the right to store certain types of oil.<ref>{{citation |title= LOOP Sour Crude Oil Storage futures |url=https://www.cmegroup.com/trading/energy/files/loop-storage-futures-wdm-fact-card.pdf |access-date=3 May 2020 }}</ref><ref>{{citation |title= Permian WTI Storage Future |url=https://www.theice.com/products/71090497/Permian-WTI-Storage-Future |access-date=3 May 2020 }}</ref>
By 5 March 2015, as oil production outpaces oil demand by 1.5 million bpd, storage capacity globally is dwindling.<ref name="oil_glut" /> In the United States alone, according to data from the Energy Information Administration, U.S. crude-oil supplies are at almost 70% of the U. S. storage capacity, the highest to capacity ratio since 1935.<ref name="oil_glut">{{citation |title=Oil Glut Sparks Latest Dilemma: Where to put it all as storage tanks near capacity, some predict spillover will send crude prices even lower |url=https://www.wsj.com/articles/oil-glut-sparks-latest-dilemma-where-to-put-it-all-1425577673 |work=Wall Street Journal |date=5 March 2015 |access-date=6 March 2015 |first=Nicole |last=Friedman }}</ref>
In 2020, rail and road tankers and decommissioned oil pipe lines are also being used to store crude oil for contango trade.<ref>{{citation |title=Rail cars latest target for traders hunting cheap oil storage |url=https://www.worldoil.com/news/2020/4/2/rail-cars-latest-target-for-traders-hunting-cheap-oil-storage |work=world Oil |date=4 February 2020 |access-date=5 April 2020 }}</ref> For the WTI crude to be delivered in May 2020, the price had fallen to -$40 per bbl (i.e. buyers would be paid by the sellers for taking delivery of crude oil) due to lack of storage/expensive storage.<ref>{{citation |title=Oil prices dip below zero as producers forced to pay to dispose of excess |newspaper=The Guardian |url=https://www.theguardian.com/world/2020/apr/20/oil-prices-sink-to-20-year-low-as-un-sounds-alarm-on-to-covid-19-relief-fund |date=20 April 2020 |access-date=21 April 2020 |last1=Ambrose |first1=Jillian }}</ref> LNG carriers and LNG tanks can also be used for long duration crude oil storage purpose since LNG can not be stored long term due to evaporation. Frac tanks are also used to store crude oil deviating from their normal use.<ref>{{citation |title=The Most Critical Oil Storage In The United States |url=https://oilprice.com/Energy/Crude-Oil/The-Most-Critical-Oil-Storage-In-The-United-States.html |date=2 May 2020 |access-date=3 May 2020 }}</ref>
==Comparative cost of production==
In their May 2019 comparison of the "cost of supply curve update" in which the Norway-based Rystad Energy—an "independent energy research and consultancy"—ranked the "worlds total recoverable liquid resources by their breakeven price", they listed the "Middle East onshore market" as the "cheapest source of new oil volumes globally" with the "North American tight oil"—which includes onshore shale oil in the United States—in second place.<ref name="Rystad_20200509">{{Cite press release| title = Rystad Energy ranks the cheapest sources of supply in the oil industry| date = 9 May 2019| access-date = 29 January 2020| url = https://www.rystadenergy.com/newsevents/news/press-releases/Rystad-Energy-ranks-the-cheapest-sources-of-supply-in-the-oil-industry-/| archive-date = 29 January 2020| archive-url = https://web.archive.org/web/20200129222740/https://www.rystadenergy.com/newsevents/news/press-releases/Rystad-Energy-ranks-the-cheapest-sources-of-supply-in-the-oil-industry-/}}</ref>
The breakeven price for North American shale oil was US$68 a barrel in 2015, making it one of the most expensive to produce. By 2019, the "average Brent breakeven price for tight oil was about US$46 per barrel. The lowest average WTI breakeven price for tight oil in 2022-2024 was in the Permian Delaware basin at $48.50/Bbl followed by Williston at $54.00/Bbl and Permian Midland at $59.00/Bbl.<ref>{{Cite web |date=13 November 2024 |title=US Crude Oil Full Cycle Cost by Basin |url=https://incorrys.com/energy/energy-cost/crude-oil-cost-us/us-crude-oil-full-cycle-cost/ |access-date=10 December 2025 |website=Incorrys}}</ref> The breakeven price of oil from Saudi Arabia and other Middle Eastern countries was US$42, in comparison.<ref name="Rystad_20200509"/>
Rystad reported that the average breakeven price for oil from the oil sands was US$83 in 2019, making it the most expensive to produce, compared to all other "significant oil producing regions" in the world.<ref name="Rystad_20200509"/> The International Energy Agency made similar comparisons.<ref name="nationalobserver_20190522">{{cite magazine |url=https://www.nationalobserver.com/2019/05/22/opinion/canada-betting-climate-failure |date=22 May 2019 |title=Canada is betting on climate failure |magazine=The National Observer |access-date=29 January 2020}}</ref>
In 2016, the ''Wall Street Journal'' reported that the United Kingdom, Brazil, Nigeria, Venezuela, and Canada had the costliest production.<ref name="WSJ_20160415">{{cite news |date=15 April 2016 |title=Barrel Breakdown |url=http://graphics.wsj.com/oil-barrel-breakdown/ |url-access=subscription |work=Wall Street Journal}}</ref> Saudi Arabia, Iran, and Iraq had the cheapest.<ref name="WSJ_20160415"/>
{| class="wikitable sortable" style=text-align:right |+ Oil and gas barrel production Cost {{US$|link=yes}}, March 2016<ref name="WSJ_20160415"/> ! Country !! Gross<br/>taxes !! Capital<br/>spending || Production<br/>costs || Admin<br/>transport || Total |- | UK || 0 || 22.67 || 17.36 || 4.30 || 44.33 |- | Brazil || 6.66 || 16.09 || 9.45 || 2.80 || 34.99 |- | Nigeria || 4.11 || 13.10 || 8.81 || 2.97 || 28.99 |- | Venezuela || 10.48 || 6.66 || 7.94 || 2.54 || 27.62 |- | Canada || 2.48 || 9.69 || 11.56 || 2.92 || 26.64 |- | U.S. Shale || 6.42 || 7.56 || 5.85 || 3.52 || 23.35 |- | Norway || 0.19 || 13.76 || 4.24 || 3.12 || 21.31 |- | U.S. non-shale || 5.03 || 7.70 || 5.15 || 3.11 || 20.99 |- | Indonesia || 1.55 || 7.65 || 6.87 || 3.63 || 19.71 |- | Russia || 8.44 || 5.10 || 2.98 || 2.69 || 19.21 |- | Iraq || 0.91 || 5.03 || 2.16 || 2.47 || 10.57 |- | Iran || 0 || 4.48 || 1.94 || 2.67 || 9.08 |- | Saudi Arabia || 0 || 3.50 || 3.00 || 2.49 || 8.98 |}
==Future projections== {{Main|Oil depletion|Peak oil}}
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.<ref name="journal"/>
The US Department of Energy in the Hirsch report indicates that <blockquote>The problems associated with world oil production peaking will not be temporary, and past "energy crisis" experience will provide relatively little guidance. The challenge of oil peaking deserves immediate, serious attention, if risks are to be fully understood and mitigation begun on a timely basis.<ref>{{cite web|url=http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf|title=DOE Hirsch Report|website=doe.gov|access-date=25 March 2018|archive-url=https://web.archive.org/web/20091215043338/http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf|archive-date=15 December 2009}}</ref></blockquote>
Global annual crude oil production (including shale oil, oil sands, lease condensate and gas plant condensate but excluding liquid fuels from other sources such as natural gas liquids, biomass and derivatives of coal and natural gas) increased from {{convert|75.86|e6oilbbl|e6m3|abbr=off|lk=on|sigfig=3}} in 2008 to {{convert|83.16|e6oilbbl|e6m3|abbr=unit|sigfig=3}} per day in 2018 with a marginal annual growth rate of 1%.<ref>{{cite web|url=https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2019-full-report.pdf|title=Full report – BP Statistical Review of World Energy 2019|access-date=29 December 2018}}</ref>
==Impact of rising oil price== The rising oil prices could negatively impact the world economy.<ref>{{cite news |title=Rising oil prices fuel fears of damage to global economy |url=https://www.theguardian.com/business/2018/sep/25/rising-oil-prices-fuel-fears-damage-global-economy |work=The Guardian |date=25 September 2018}}</ref> One example of the negative impact on the world economy, is the effect on the supply and demand. High oil prices indirectly increase the cost of producing many products thus causing increased prices to the consumer.<ref>{{cite web|title=What are the possible causes and consequences of higher oil prices on the overall economy?|url=https://www.frbsf.org/education/publications/doctor-econ/2007/november/oil-prices-impact-economy/|access-date=2021-10-18|website=Federal Reserve Bank of San Francisco|date=November 2007 |language=en}}</ref> Since supplies of petroleum and natural gas are essential to modern agriculture techniques, a fall in global oil supplies could cause spiking food prices in the coming decades.<ref name="journal">{{cite journal |title=Peak Oil, Food Systems, and Public Health |journal=American Journal of Public Health |volume=101 |issue=9 |pages=1587–1597 |date=September 2011 |pmc=3154242 |last1=Neff |first1=R. A. |last2=Parker |first2=C. L. |last3=Kirschenmann |first3=F. L. |last4=Tinch |first4=J. |last5=Lawrence |first5=R. S. |pmid=21778492 |doi=10.2105/AJPH.2011.300123 }}</ref><ref>{{cite news |title=Former BP geologist: peak oil is here and it will 'break economies' |url=https://www.theguardian.com/environment/earth-insight/2013/dec/23/british-petroleum-geologist-peak-oil-break-economy-recession |work=The Guardian |date=23 December 2013}}</ref> One reason for the increase in food prices in 2007–08 may be the increase in oil prices during the same period.<ref>{{cite web |url=https://www.csmonitor.com/2008/0118/p08s01-comv.html |title=The global grain bubble |work=Christian Science Monitor |date=18 January 2008 |access-date=4 November 2019 |archive-date=30 November 2009 |archive-url=https://web.archive.org/web/20091130063759/http://www.csmonitor.com/2008/0118/p08s01-comv.html }}</ref>
Bloomberg warned that the world economy, which was already experiencing an inflationary "shock", would worsen with oil priced at $100 in February 2022.<ref name="Bloomberg_20220224">{{Cite news| last1 = Curran| first1 = Enda| last2 = Miller| first2 = Rich| title = World Economy Inflation Shock Set to Worsen From Oil at $100| work = Bloomberg| access-date = 2 July 2022| date = 24 February 2022| url = https://www.bloomberg.com/news/articles/2022-02-24/oil-at-100-set-to-compound-the-world-economy-s-inflation-shock}}</ref> The International Monetary Fund (IMF) described how a combination of the "soaring" price of commodities, imbalances in supply and demand, followed by pressures related to the Russian invasion of Ukraine, resulted in monetary policies being tightened by central banks, as some inflation in some countries broke 40-year-old record highs.<ref name="Gourinchas_20220419">{{Cite news| last = Gourinchas| first = Pierre-Olivier| title = War Dims Global Economic Outlook as Inflation Accelerates| work = IMF Blog| access-date = 2 July 2022| date = 19 April 2022 | url = https://blogs.imf.org/2022/04/19/war-dims-global-economic-outlook-as-inflation-accelerates/}}</ref><ref name="Bloomberg_20220224"/> The IMF also cautioned that there was a potential for social unrest in poorer nations as the price of food and fuel increases.<ref name="Gourinchas_20220419"/>
==Impact of declining oil price== A major rise or decline in oil price can have both economic and political impacts. The decline on oil price during 1985–1986 is considered to have contributed to the fall of the Soviet Union.<ref>{{cite web|url=http://www.aei.org/wp-content/uploads/2011/10/20070419_Gaidar.pdf|title=The Soviet Collapse: Grain and Oil, By Yegor Gaidar, American Enterprise Institute, 2007|access-date=17 October 2015}}</ref> Low oil prices could alleviate some of the negative effects associated with the resource curse, such as authoritarian rule<ref>{{cite journal|title = Oil and Autocratic Regime Survival|journal = British Journal of Political Science|date = 1 April 2015|issn = 1469-2112|pages = 287–306|volume = 45|issue = 2|doi = 10.1017/S0007123413000252|first1 = Joseph|last1 = Wright|first2 = Erica|last2 = Frantz|first3 = Barbara|last3 = Geddes|author-link3=Barbara Geddes (academic)}}</ref><ref>{{cite journal|title = Resource Wealth and Political Regimes in Africa|journal = Comparative Political Studies|date = 1 September 2004|issn = 0010-4140|pages = 816–841|volume = 37|issue = 7|doi = 10.1177/0010414004266867|language = en|first1 = Nathan|last1 = Jensen|first2 = Leonard|last2 = Wantchekon|s2cid = 154999593}}</ref><ref>{{cite journal|title = Does Oil Hinder Democracy?|journal = World Politics|date = 1 April 2001|issn = 1086-3338|pages = 325–361|volume = 53|issue = 3|doi = 10.1353/wp.2001.0011|first = Michael L.|last = Ross|s2cid = 18404}}</ref><ref>{{cite journal|title = Natural-Resource Wealth and the Survival of Autocracy|journal = Comparative Political Studies|date = 1 August 2007|issn = 0010-4140|pages = 995–1018|volume = 40|issue = 8|doi = 10.1177/0010414006287238|language = en|first = Jay|last = Ulfelder|s2cid = 154316752}}</ref><ref>{{cite journal|title = Resource Curse or Rentier Peace? The Ambiguous Effects of Oil Wealth and Oil Dependence on Violent Conflict|journal = Journal of Peace Research|date = 1 November 2009|issn = 0022-3433|pages = 757–776|volume = 46|issue = 6|doi = 10.1177/0022343309340500|language = en|first1 = Matthias|last1 = Basedau|first2 = Jann|last2 = Lay|s2cid = 144798465|url = http://www.ssoar.info/ssoar/handle/document/36912}}</ref> and gender inequality.<ref>{{cite journal|url = http://cps.sagepub.com/content/early/2015/08/17/0010414015597510|access-date = 7 November 2015|doi = 10.1177/0010414015597510|title = Resource Wealth and Women's Economic and Political Power in the U.S. States|year = 2016|last1 = Simmons|first1 = Joel W.|journal = Comparative Political Studies|volume = 49|pages = 115–152|s2cid = 155279746|url-access = subscription}}</ref><ref>{{cite journal|title = Oil, Islam, and Women|journal = American Political Science Review|date = 1 February 2008|issn = 1537-5943|pages = 107–123|volume = 102|issue = 1|doi = 10.1017/S0003055408080040|first = Michael L.|last = Ross|s2cid = 54825180}}</ref> Lower oil prices could however also lead to domestic turmoil and diversionary war. The reduction in food prices that follows lower oil prices could have positive impacts on violence globally.<ref name=":0">{{Cite news|title = Here's how falling oil prices could make the world more peaceful and cooperative|url = https://www.washingtonpost.com/news/monkey-cage/wp/2016/01/28/heres-how-tumbling-oil-prices-could-make-the-world-a-more-peaceful-and-cooperative-place/|newspaper = The Washington Post|date = 28 January 2016|access-date = 28 January 2016|issn = 0190-8286|language = en-US|first = Erik|last = Voeten|author-link1=Erik Voeten}}</ref>
Research shows that declining oil prices make oil-rich states less bellicose.<ref>{{cite journal|title = Oil prices and interstate conflict|journal = Conflict Management and Peace Science|volume = 34|issue = 6|date = 19 October 2015|issn = 0738-8942|pages = 575–596|doi = 10.1177/0738894215606067|language = en|first = Cullen S.|last = Hendrix|s2cid = 155477031}}</ref> Low oil prices could also make oil-rich states engage more in international cooperation, as they become more dependent on foreign investments.<ref>{{cite journal|title = Oil and International Cooperation|journal = International Studies Quarterly|volume = 60|date = 14 December 2015|issn = 0020-8833|pages = 85–97|doi = 10.1093/isq/sqv003|language = en|first1 = Michael L.|last1 = Ross|first2 = Erik|last2 = Voeten}}</ref> The influence of the United States reportedly increases as oil prices decline, at least judging by the fact that "both oil importers and exporters vote more often with the United States in the United Nations General Assembly" during oil slumps.<ref name=":0" />
The macroeconomics impact on lower oil prices is lower inflation. A lower inflation rate is good for the consumers. This means that the general price of a basket of goods would increase at a bare minimum on a year to year basis. Consumer can benefit as they would have a better purchasing power, which may improve real gdp.<ref name="auto">{{cite web|last1=Pettinger|first1=Tevjan|title=Impact of falling oil prices|url=https://www.economicshelp.org/blog/11738/oil/impact-of-falling-oil-prices/|website=Economics Org|access-date=5 October 2017}}</ref> However, in recent countries like Japan, the decrease in oil prices may cause deflation and it shows that consumers are not willing to spend even though the prices of goods are decreasing yearly, which indirectly increases the real debt burden.<ref name="auto"/> Declining oil prices may boost consumer oriented stocks but may hurt oil-based stocks.<ref>{{cite web|url=https://www.cnbc.com/2014/10/03/the-surprising-impact-of-plunging-oil-prices.html|title=What the impact of plunging oil prices really means|first=Alex|last=Rosenberg|date=5 October 2014|website=CNBC|access-date=25 March 2018}}</ref><ref>{{cite web|url=http://www.businessinsider.com/goldman-consumer-stocks-to-benefit-from-low-oil-prices-2014-11|title=Goldman Consumer Stocks To Benefit From Low Oil Prices|date=17 November 2014|work=Business Insider|access-date=17 October 2015}}</ref> It is estimated that 17���18% of S&P would decline with declining oil prices.
It has also been argued that the collapse in oil prices in 2015 should be very beneficial for developed western economies, who are generally oil importers and aren't over exposed to declining demand from China.<ref>{{cite news|url=http://seekingalpha.com/article/3845256-opportunity-decline-oil-price |title=Opportunity From The Decline In Oil Price |first=Edward Pearce |last=Gould|date=28 January 2016 |newspaper=Seeking Alpha|access-date= 25 March 2018}}</ref> In the Asia-Pacific region, exports and economic growth were at significant risk across economies reliant on commodity exports as an engine of growth. The most vulnerable economies were those with a high dependence on fuel and mineral exports to China, such as: Korea DPR, Mongolia and Turkmenistan—where primary commodity exports account for 59–99% of total exports and more than 50% of total exports are destined to China.<ref>{{citation |ssrn=2617542 |date= 2015|title= Commodity Price Crash: Risks to Exports and Economic Growth in Asia-Pacific LDCs and LLDCs |publisher=United Nations ESCAP |author1=Saggu, A. |author2=Anukoonwattaka, W. |name-list-style=amp }}</ref>
The decline in China's demand for commodities also adversely affected the growth of exports and GDP of large commodity-exporting economies such as Australia (minerals) and the Russian Federation (fuel). On the other hand, lower commodity prices led to an improvement in the trade balance—through lower the cost of raw materials and fuels—across commodity importing economies, particularly Cambodia, Kyrgyzstan, Nepal and other remote island nations (Kiribati, Maldives, Micronesia (F.S), Samoa, Tonga, and Tuvalu) which are highly dependent on fuel and agricultural imports.<ref>{{citation |ssrn=2617542 |date= 2015|title= Commodity Price Crash: Risks to Exports and Economic Growth in Asia-Pacific LDCs and LLDCs |publisher=United Nations ESCAP |author1=Saggu, A. |author2=Anukoonwattaka, W. |name-list-style=amp }}</ref>
The oil importing economies like EU, Japan, China or India would benefit, however the oil producing countries would lose.<ref>{{cite web|url=https://www.thefinancialist.com/the-effect-of-low-oil-prices-a-regional-tour/|title=The Effect of Low Oil Prices: A Regional Tour |work=The Financialist|access-date=17 October 2015|archive-url=https://web.archive.org/web/20151017005855/http://www.thefinancialist.com/the-effect-of-low-oil-prices-a-regional-tour/|archive-date=17 October 2015}}</ref><ref>{{cite web|url=https://www.wsj.com/articles/falling-oil-spells-boon-for-most-of-asias-economies-1420398456|title=Falling Oil Spells Boon for Most of Asia's Economies|first=Eric|last=Yep|date=4 January 2015|work=WSJ|access-date=17 October 2015}}</ref><ref>{{cite web|url=http://primepair.com/forex-news/profits-oil-prices-plunge-13-01-2015|title=Who Profits When Oil Prices Plunge?|date=13 January 2015|work=PrimePair|access-date=17 October 2015|archive-url=https://web.archive.org/web/20150113170250/http://primepair.com/forex-news/profits-oil-prices-plunge-13-01-2015|archive-date=13 January 2015}}</ref> A Bloomberg article presents results of an analysis by Oxford Economics on the GDP growth of countries as a result of a drop from $84 to $40. It shows the GDP increase between 0.5% to 1.0% for India, USA and China, and a decline of greater than 3.5% from Saudi Arabia and Russia. A stable price of $60 would add 0.5 percentage point to global gross domestic product.
Katina Stefanova has argued that falling oil prices do not imply a recession and a decline in stock prices.<ref>{{cite web|url=https://www.forbes.com/sites/katinastefanova/2014/12/31/do-falling-oil-prices-foreshadow-a-slump-in-the-stock-market-in-2015/|title=Do Falling Oil Prices Foreshadow a Slump in the Stock Market in 2015?|first=Katina|last=Stefanova|work=Forbes|access-date=17 October 2015}}</ref> Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, had earlier written that that positive impact on consumers and businesses outside of the energy sector, which is a larger portion of the US economy will outweigh the negatives.<ref>{{cite web|url=http://www.schwab.com/public/schwab/nn/articles/Black-Dog-Are-Plunging-Oil-Prices-a-Positive-or-a-Negative|title=Black Dog: Are Plunging Oil Prices a Positive or a Negative?, Liz Ann Sonders, November 3, 2014|website=schwab.com|access-date=25 March 2018|archive-url=https://web.archive.org/web/20141220084048/http://www.schwab.com/public/schwab/nn/articles/Black-Dog-Are-Plunging-Oil-Prices-a-Positive-or-a-Negative|archive-date=20 December 2014}}</ref>
While President Trump said in 2018, that the lower price of oil was like a "big Tax Cut for America and the World",<ref name="CNN_Egan_2018121"/> ''The Economist'' said that rising oil prices had a negative impact on oil-importing countries in terms of international trade.<ref name="economist_20180929_oil"/> Import prices rise in relation to their exports.<ref name="economist_20180929_oil"/> The importing country's current account deficits widen because "their exports pay for fewer imports".<ref name="economist_20180929_oil"/>
==Speculative trading and crude oil futures== In the wake of the 1970s oil crisis, speculative trading in crude oil and crude oil futures in the commodity markets emerged.<ref name="Qiang_201307"/><ref name="Ji_Qiang_201312"/>
NYMEX launched crude oil futures contracts in 1983, and the IPE launched theirs in June 1988.<ref name="Petroleum Science_Tian_20191201"/> Global crude oil prices began to be published through NYMEX and IPE crude oil futures market.<ref name="Petroleum Science_Tian_20191201"/> Volatility in crude oil prices can cause problems for the global economy. These crude oil futures contracts helped mitigate the "economic hazards of international crude oil spot price fluctuations".<ref name="Petroleum Science_Tian_20191201"/> By 2019, NYMEX and ICE had become "representative of the world crude oil futures market"—an important factor in the world economy.<ref name="Petroleum Science_Tian_20191201"/> Crude oil futures bring some uncertainty to the market and contribute to crude oil price fluctuations.<ref name="Petroleum Science_Tian_20191201"/>
By 2008, there were a number of widely traded oil futures market listings.<ref name="Bloomberg_2008">{{cite news |url= https://www.bloomberg.com/markets/commodities/energyprices.html|title= Bloomberg Energy Prices|access-date=11 June 2008|publisher= Bloomberg.com}}</ref> Some of the big multinational oil companies actively participate in crude oil trading applying their market perception to make profit.<ref>{{cite web| title =Big Oil's Secret World of Trading |date=30 March 2021 |url=https://www.bloombergquint.com/markets/big-oil-s-secret-world-of-trading-fuels-profits-as-climate-change-worries-rise|access-date=31 March 2021}}</ref>
===Speculation during the 2008 financial crisis=== According to a U.S. Commodity Futures Trading Commission (CFTC) 29 May 2008 report the "Multiple Energy Market Initiatives" was launched in partnership with the United Kingdom Financial Services Authority and ICE Futures Europe in order to expand surveillance and information sharing of various futures contracts. Part 1 is "Expanded International Surveillance Information for Crude Oil Trading."<ref name=CFTC_2008 /> This announcement received wide coverage in the financial press, with speculation about oil futures price manipulation.<ref name="ftgateway_2008" /><ref name="washingtonpost_2008" /><ref name="money_2008" /> In June 2008 ''Business Week'' reported that the surge in oil prices prior to the 2008 financial crisis had led some commentators to argue that at least some of the rise was due to speculation in the futures markets.<ref name=Wallace2008 />
The July 2008 interim report by the Interagency Task Force found that speculation had not caused significant changes in oil prices and that the increase in oil prices between January 2003 and June 2008 [were] largely due to fundamental supply and demand factors."<ref name="ITF_200807">{{cite journal| page = 48| title = Interim Report on Crude Oil |journal=Interagency Task Force on Commodity Markets |location=Washington, D.C. |url=https://www.cftc.gov/sites/default/files/idc/groups/public/@newsroom/documents/file/itfinterimreportoncrudeoil0708.pdf |date= July 2008 |access-date=27 October 2020}}</ref>{{rp|3}} 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.<ref name="ITF_200807"/>{{rp|3}}
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 from 2005 to 2008.<ref name="ITF_200807"/>{{rp|14}} The report forecast that this imbalance would persist in the future,<ref name="ITF_200807"/>{{rp|4}} 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.<ref name="ITF_200807"/>{{rp|4}}
===Hedging using oil derivatives=== The use of hedging using commodity derivatives as a risk management tool on price exposure to liquidity and earnings, has been long established in North America. Chief Financial Officers (CFOS) use derivatives to dampen, remove or mitigate price uncertainty.<ref name="ogfj_2012">{{cite web | url=http://www.ogfj.com/articles/print/volume-9/issue-11/features/etrm/hedging-is-an-effective-risk-management.html | title=Hedging Is An Effective Risk Management Tool For Upstream Companies | publisher=Oil and Gas Financial Journal | date=1 November 2012 | access-date=17 February 2016 | author=Price, Kevin | location=London}}</ref> Bankers also use hedge funds to more "safely increase leverage to smaller oil and gas companies."<ref name="ogfj_2012" /> However, when not properly used, "derivatives can multiply losses"<ref name="ogfj_2012" /> particularly in North America where investors are more comfortable with higher levels of risk than in other countries.<ref name="ogfj_2012" />
With the large number of bankruptcies as reported by Deloitte<ref name="fortune_2016">{{cite magazine | url=http://fortune.com/2016/02/16/oil-companies-bankrupt/ | title=One-Third of Oil Companies Could Go Bankrupt this Year | magazine=Fortune | date=16 February 2016 | access-date=17 February 2016 | author=Zillman, Claire}}</ref> "funding [for upstream oil industry] is shrinking and hedges are unwinding."<ref name="G&M_Deloitte_2016" /> "Some oil producers are also choosing to liquidate hedges for a quick infusion of cash, a risky bet."<ref name="reuters_2016_Feb16" />
According to John England, the Vice-chairman Deloitte LLP, "Access to capital markets, bankers' support and derivatives protection, which helped smooth an otherwise rocky road, are fast waning...The roughly 175 companies at risk of bankruptcy have more than $150 billion in debt, with the slipping value of secondary stock offerings and asset sales further hindering their ability to generate cash."<ref>{{citation |first=John |last=England |work=Deloitte LLP |title=Statement |date=16 February 2016}}</ref>
To finance exploration and production of the unconventional oil industry in the United States, "hundreds of billions of dollars of capital came from non-bank participants [non-bank buyers of bank energy credits] in leveraged loans that were thought at the time to be low risk.<ref name="ft_2015">{{cite news | url=https://www.ft.com/content/5bb59df2-9808-11e4-b4be-00144feabdc0 |archive-url=https://ghostarchive.org/archive/G93VQ |archive-date=11 December 2022 |url-access=subscription | title=Lesson from history on perils facing oil and gas investors | newspaper=Financial Times | date=9 January 2015 | access-date=17 February 2016 | author=Dizard, John}}</ref> However, with the oil glut that continued into 2016, about a third of oil companies are facing bankruptcy.<ref name="fortune_2016"/> While investors were aware that there was a risk that the operator might declare bankruptcy, they felt protected because "they had come in at the 'bank' level, where there was a senior claim on the assets [and] they could get their capital returned."<ref name="ogfj_2012" />
According to a 2012 article in ''Oil and Gas Financial Journal'', "the combination of the development of large resource plays in the US and the emergence of business models designed to ensure consistent dividend payouts to investors has led to the development of more aggressive hedging policies in companies and less restrictive covenants in bank loans."<ref name="ogfj_2012" />
===Institutional investors divesting from oil industry=== At the fifth annual World Pensions Forum in 2015, Jeffrey Sachs advised institutional investors to divest from carbon-reliant oil industry firms in their pension fund's portfolio.<ref name="Sachs_2015">{{cite news|first1=Andrew |last1=Pearce|title= Jeffrey Sachs: Fund Managers Have a Duty to Dump Fossil Fuels|url=http://www.efinancialnews.com/story/2015-12-07/sachs222 |access-date=30 December 2015|work=Financial News|date=6 December 2015}}</ref>
==See also== {{div col|colwidth=18em}} * 2007–2008 world food price crisis * Asymmetric price transmission * Chronology of world oil market events (1970–2005) * World oil market chronology from 2003 * 2011–2013 world oil market chronology * 2014–2016 world oil market chronology * 2017–2019 world oil market chronology * 2020–2022 world oil market chronology * 2021–2023 global energy crisis * 2023–2025 world oil market chronology * Cost competitiveness of fuel sources * Efficient energy use * Elasticity (economics) * Energy crisis * Food vs fuel * Gasoline usage and pricing * Simmons–Tierney bet * Stagflation * Supply and demand {{div col end}}
==References== {{reflist}}
==External links== {{Commons category|Oil prices}} * [https://fred.stlouisfed.org/tags/series?t=oil Oil price data], Federal Reserve Economic Data * [http://www.energy.eu/#prices Gasoline and diesel fuel prices in Europe] * [http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html CME (formerly NYMEX) future prices for light sweet crude, Session Overview]. * [http://www.nymex.com NYMEX:BZ] is the most commonly quoted price for Brent crude oil * {{cite web| title = Monthly Oil Market Report| access-date = 30 October 2020 |work=OPEC| url = https://www.opec.org/opec_web/en/publications/338.htm}} * [https://web.archive.org/web/20100327111055/http://mazamascience.com/Energy/NYMEXFutures/ Energy Futures Databrowser] Current and historical charts of NYMEX energy futures chains. * [http://www.livecharts.co.uk/MarketCharts/crude.php Live oil prices] NYMEX Crude oil price chart * [http://www.eia.doe.gov/ U.S. Energy Information Administration] Part of the U.S. Department of Energy, official source of price and other statistical information **{{cite report |title=Oil prices and outlook |work=U.S. Energy Information Administration (EIA)| access-date = 27 October 2020| url = https://www.eia.gov/energyexplained/oil-and-petroleum-products/prices-and-outlook.php |date=2020}} **{{cite web| title = Energy & Financial Markets: What Drives Crude Oil Prices? - Energy Information Administration| access-date = 27 October 2020| url = https://www.eia.gov/finance/markets/crudeoil/}} * {{cite web| title = Crude Oil Prices - 70 Year Historical Chart| access-date = 27 October 2020| url = https://www.macrotrends.net/1369/crude-oil-price-history-chart}} *{{cite web| title = History and Analysis -Crude Oil Prices| access-date = 27 October 2020| date = 2 January 2008| archive-url = https://web.archive.org/web/20080102043155/http://www.wtrg.com/prices.htm |url=http://www.wtrg.com/prices.htm |archive-date=2 January 2008 |first=James L. |last=Williams |work=WTRG Economics |location=London, Arkansas}}
{{Petroleum industry}}
{{DEFAULTSORT:Price Of Petroleum}} Category:Petroleum economics Category:Oil and gas markets Category:Pricing Category:Late modern economic history