The ubiquitous commodity that runs the world – oil has arguably helped create the modern world. Its cleaner than coal, it enables commerce, industry and transport of people and goods. It has been used for millennia and ancient Herodotus says it was used in building Babylonian walls and towers. The Chinese are considered the first civilization to use oil as fuel, as early as 4th century B.C.E. Here’s a bit of a breakdown of how it’s used today.
How crude is used according the U.S. Energy Information Administration:
- 44% Gasoline
- 19% Heating Oil
- 15% Other Products (including plastics and other consumer/industrial products)
- 8% Jet Fuel
- 6% Propane
- 5% Residual Fuel (shipping fleets, factory power, electricity production)
- 3% Asphalt
Brent is the oil combined from 15 different fields located in the North Sea. It isn’t as “light” and “sweet” as WTI, but it’s still great for producing gasoline. It is primarily refined in Northwest Europe, and is the major benchmark for other crude oils produced in Europe or Africa.
What does “light” oil mean?
it a type of crude that flows freely at room temperature, has lower wax content and lower density compare to its heavy petroleum counterpart. It is more valuable than heavy crude as it yields more gasoline and diesel.
What does “sweet” oil mean?
first off although a disclaimer shouldn’t be necessary, never eat/drink oil sweet just means that it has less sulfur content than other “sour” oils. This makes it more desirable because it also yields more gasoline than more “sour” petroleum.
What Drives Crude Oil’s Price?
Crude oil’s price is greatly influenced by supply and demand, affected by worldwide output, as well as global economic prosperity. A combination of increased demand and lower of production can push markets to buy oil causing its price to rise and inversely if supply is up and demand is down, then markets will like sell their crude positions causing the price to slip.
WTI (West Texas intermediate) oil is usually used as the pricing benchmark for the U.S. In addition to supply and demand, the price of WTI is also driven by:
- geopolitical and economic events
- stockpiles at Cushing, Oklahoma
- OPEC’s production target
- natural disasters
Since I like cartoons so much I found an great animation video explaining crude a little bit more. Who are the major players? Why does the price of oil remain low? What does OPEC mean and what is OPEC’s role?
Fun facts about crude:
- Oil is created from the decomposition of organic materials under intense heat and pressure over millions of years.
- A barrel of oil – the standardized unit of crude measurement equates to 42 US gallons or 159 liters.
- Oil is also referred to as “Texas Tea” and “Black Gold.” Texas is the leading state in crude oil production with over 5 billion barrels in reserves.
- 40 Percent of the World’s Ocean Cargo is Oil.
- Saudi Arabia is the largest oil producer today and has the largest amount of reserves (267 billion barrels).
Written by: Galatia Dodou