Petroleum, also called crude oil, is a thick and black liquid. It consists mainly
of hydrocarbons and is mainly found in the Middle East, North America, and Russia.
It is the most important world energy source. It supplies 38% of the world's energy
at present. Petroleum can be separated into less complex but more useful mixtures
by fractional distillation. The process is called oil refining. Petroleum can be
easily transported by pipeline. Treated petroleum can be used as fuels; mainly gasoline
(petrol) for cars, Diesel fuel for Diesel engines used in trucks, trains and ships,
kerosene fuel for jets and as lubricants.
Types Of crude oil
- West Texas Intermediate (WTI), a very high-quality, sweet, light oil delivered at
Cushing, Oklahoma for North American oil
- Brent Blend, comprising 15 oils from fields in the Brent and Ninian systems in the
East Shetland Basin of the North Sea. The oil is landed at Sullom Voe terminal in
the Shetlands. Oil production from Europe, Africa and Middle Eastern oil flowing
West tends to be priced off this oil, which forms a benchmark
- Dubai-Oman, used as benchmark for Middle East sour crude oil flowing to the Asia-Pacific
- Tapis (from Malaysia, used as a reference for light Far East oil)
- Minas (from Indonesia, used as a reference for heavy Far East oil)
- The OPEC Reference Basket, a weighted average of oil blends from various OPEC (The
Organization of the Petroleum Exporting Countries) countries
The top three oil producing countries are Saudi Arabia, Russia, and the United States.
About 80% of the world's readily accessible reserves are located in the Middle East,
with 62.5% coming from the Arab 5: Saudi Arabia, UAE, Iraq, Qatar and Kuwait. A
large portion of the world's total oil exists as unconventional sources, such as
bitumen in Canada and Venezuela and oil shale. While significant volumes of oil
are extracted from oil sands, particularly in Canada.
OPEC stands for 'Organization of Petroleum Exporting Countries'. It is an organization
of eleven developing countries that are heavily dependent on oil revenues as their
main source of income. The current Members are Algeria, Indonesia, Iran, Iraq, Kuwait,
Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. OPEC
controls almost 40 percent of the world's crude oil and it accounts for about 75
per cent of the worlds proven oil reserves. Its exports represent 55 per cent of
the oil traded internationally.
Oil accounts for a large percentage of the world's energy consumption, ranging from
a low of 32% for Europe and Asia, up to a high of 53% for the Middle East. Other
geographic regions' consumption patterns are as follows: South and Central America
(44%), Africa (41%), and North America (40%). The world at large consumes 30 billion
barrels of oil per year, and the top oil consumers largely consist of developed
nations. In fact, 24% of the oil consumed in 2004 went to the United States alone,
though by 2007 this had dropped to 21% of world oil consumed.
In the US, in the states of Arizona, California, Hawaii, Nevada, Oregon and Washington,
the Western States Petroleum Association (WSPA) represents companies responsible
for producing, distributing, refining, transporting and marketing petroleum. This
non-profit trade association was founded in 1907, and is the oldest petroleum trade
association in the United States
Factors influencing prices
- Supply and consumption of the commodity influences its prices significantly since
crude oil used extensively in a vast array of activities around the world.
- Political unrests mainly attributed to major oil producing and exporting countries
are also influential to crude oil prices.
- Stock flows at warehouses, refinery hazards, weather conditions and fund buying
are other factors which share the ability to move crude oil prices.