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barrel petroleum spot prices, May 1987 – April 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.]]
The 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.
The price of oil underwent a significant decrease after 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.
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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.
On July 14, 2008, President George W. Bush lifted the executive order removing the ban on offshore drilling that had been enacted by President George H. W. Bush in 1990 and renewed by President William J. Clinton. This action was viewed initially as only symbolic or political since the 1982 Congressional moratorium on offshore drilling was unaffected by President Bush's action. 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 September 24, 2008, Speaker of the House, Nancy Pelosi allowed the 26-year moratorium to expire. 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.
Most of the above oil futures have delivery dates in all 12 months of the year.
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.
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Category:Petroleum economics and industry Category:Commodities market
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