Price of petroleum

Brent barrel petroleum spot prices, May 1987 – Jan 2011. Due to exchange
 rate fluctuations, the real price line is only relevant to the United States
and countries with a currency tied to the U.S. dollar at a constant
rate throughout the period.

Price of petroleum as quoted in news generally refers to the spot price per barrel (159 liters) of either WTI/light crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at Cushing, Oklahoma, or of Brent as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange has been incorporated) for delivery at Sullom Voe.
The price of a barrel of oil is highly dependent on both its grade, determined by factors such as its specific gravity or API and its sulphur content, and its location. Other important benchmarks include Dubai, Tapis, and the OPEC basket. 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".
The demand for oil is highly dependent on global macroeconomic conditions. According to the International Energy Agency, high oil prices generally have a large negative impact on the global economic growth.
The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960 to try and counter the oil companies cartel, which 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.
Oil price has undergone a significant decrease since the record peak of US$145 it reached in July 2008. On December 23, 2008, WTI crude oil spot price fell to US$30.28 a barrel, the lowest since the financial crisis of 2007–2010 began, and traded at between US$35 a barrel and US$82 a barrel in 2009. On 31 January 2011, the Brent price hit $100 a barrel for the first time since October 2008, on concerns about the political unrest in 
Egypt.

History
1967 Oil Embargo, 1973 oil crisis, 1979 energy crisis, 1980s oil glut, and Oil price increase of 1990

Long-term oil prices, 1861-2008 (orange line adjusted for inflation, blue not adjusted). Due to exchange rate fluctuations,
the orange line represents the price experience of U.S. consumers only.

Recent price history
Weekly reports on crude oil inventories or total stockpiles in storage
 facilities like these tanks have a strong bearing on oil prices
New York Mercantile Exchange prices for West Texas Intermediate 1996 - 2010
A recent low point was reached in January 1999 of $17 (all prices are in US$ per barrel), after increased oil production from Iraq coincided with the Asian Financial Crisis, which reduced demand. Prices then increased rapidly, more than doubling by September 2000 to $35, then fell until the end of 2001 before steadily increasing, reaching $40–50 by September 2004. In October 2004, light crude futures contracts on the NYMEX for November delivery exceeded $53 and for December delivery exceeded $55. Crude oil prices surged to a record high above $60 in June 2005, sustaining a rally built on strong demand for gasoline and diesel and on concerns about refiners' ability to keep up. This trend continued into early August 2005, as NYMEX crude oil futures contracts surged past $65 as consumers kept up the demand for gasoline despite its high price. Crude oil futures peaked at a close of over $77 in July 2006, and in December 2006 at about $63. That is just about where they began the year 2006. In September 2007, US crude (WTI) crossed $80. Multiple factors caused this high price. OPEC announced an output increase lower than expected. US stocks fell lower than experts predicted, changes in federal oil policies , and six pipelines were attacked by a leftist group in Mexico. In October 2007 US light crude rose above $90 for the first time, due to a combination of tensions in eastern Turkey and the reducing strength of the US dollar.
On January 2, 2008, a single trade was made at $100, but the price did not stay above $100 until late February.

Oil broke through $110 on March 12, 2008, $125 on May 9, 2008, $130 on May 21, 2008 , $135 on May 22, 2008, $140 on June 26, 2008 and $145 on July 3, 2008. On July 11, 2008, oil prices rose to a new record of $147.27 following concern over recent Iranian missile tests.
However, oil prices declined by more than $20 over the next two weeks, settling around $125 a barrel on July 24, 2008. A strong contributor to this price decline was the drop in demand for oil in the US. Miles driven there in a month were down in March–May 2008 compared to 2007, with the 4% decline in May being the largest drop in history. Oil further dropped down to its lowest price in 3 months, at around $112 a barrel, on August 11, 2008, and on September 15, oil price fell below $100 for the first time in seven months. On October 11, oil fell as much as $8.89, or 10.17% to $77.70 per barrel as global equities slid.
Oil traded below $70 on October 16, 2008. On December 21, 2008, oil was trading at $33.87 a barrel, less than one fourth of the peak price reached four months earlier. Prices did not rebound once 2009 started. Instead, after initially climbing above $48, prices descended by mid-February to below $34, hurt by forecasts for further declines in world demand. Through March and April 2009, oil traded at about $40 per barrel. By August 2009, prices returned to $70 a barrel.

Benchmark pricing

Main article: Benchmark (crude oil)
After the collapse of the OPEC-administered pricing system in 1985, and a short lived experiment with netback pricing, oil-exporting countries adopted a market-linked pricing mechanism. First adopted by PEMEX in 1986, market-linked pricing received wide acceptance and by 1988 became and still is the main method for pricing crude oil in international trade. The current reference, or pricing markers, are Brent, WTI , and Dubai/Oman.

Market listings

Commodities markets
Oil is marketed among other products in commodities markets. See above for details. Widely traded oil futures, and related natural gas futures, include:
Petroleum
Nymex Crude Future
Dated Brent Spot
WTI Cushing Spot
Nymex Heating Oil Future
Nymex RBOB Gasoline Future
Natural gas
Nymex Henry Hub Future
Henry Hub Spot
New York City Gate Spot
Most of the above oil futures have delivery dates in all 12 months of the year.

Speculation

The surge in oil prices in the past several years has led some experts to argue that at least some of the rise is due to speculation in the futures markets. This has led to an investigation, which reached an interim conclusion that speculation was largely not responsible for the rise. Economist James K. Galbraith believes that much of the rise is due to the "Enron loophole" drafted in a rider by former Texas senator Phil Gramm, which allowed energy futures to avoid Commodity Futures Trading Commission oversight. Galbraith cites Masters, a hedge fund manager, who observed that index speculation tied to commodities by pension funds and other investment vehicles rose from $13 billion in 2003 to $250 billion in 2008. Galbraith observed that with Goldman Sachs predicting a rise in the price to $200 and Gazprom $250, suppliers may react to the rise by restricting supply until they can sell their product at a higher price. In 2009, Seismic Micro-Technology conducted a survey of geophysicists and geologists about the future of crude oil. Of the survey participants 80 percent predicted the price for a barrel of oil will rise to be somewhere between $50 and $100 per barrel by June 2010. Another 50 percent saying it will rise even further to $100 to $150 a barrel in the next five years.

Futures investigation
The U.S. Commodity Futures Trading Commission (CFTC) announced "Multiple Energy Market Initiatives" on May 29, 2008. Part 1 is "Expanded International Surveillance Information for Crude Oil Trading." The CFTC announcement stated it has joined with the United Kingdom Financial Services Authority and ICE Futures Europe in order to expand surveillance and information sharing of various futures contracts. This announcement has received wide coverage in the financial press, with speculation about oil futures price manipulation.
The interim report by the Interagency Task Force, released in July, found that speculation had not caused significant changes in oil prices and that fundamental supply and demand factors provide the best explanation for the crude oil price increases. The report found that the primary reason for the price increases was that the world economy 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.
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 in the last three years. The report forecast that this imbalance would persist in the future, leading to continued upward pressure on oil prices, and that large or rapid movements in oil prices are likely to occur even in the absence of activity by speculators. The task force was continues to analyze commodity markets and intends to issue further findings later in the year.

(source:wikipedia)