The Current Oil Prices. The price of crude oil directly affect the cost of gasoline, home heating oil, manufacturing and electric power generation. If it goes higher then so do these other prices, although it never does seem to fall as fast does it? The Crude oil price makes up around 55% of the price of a gallon of gasoline, while distribution and taxes influence the remaining 45% of this cost.
What are the numbers? The EIA states that 96% of transportation relies on oil, 43% of industrial product, 21% of residential and commercial, and only 3% of electric power. The price of crude carries through to everything you purchase and food is really affected. Higher crude oil prices are a driver on higher inflation.
If crude oil prices rise the price of natural gas also rises, and LNG is used to power 14% of electric power generation, 73% of residential and commercial, and 39% of industrial production.
Crude oil prices measure the spot price of various barrels of oil. The most common used is either the West Texas Intermediate or the Brent Blend. The OPEC basket price and the NMEX Futures price are also sometimes quoted on the market.
West Texas Intermediate (WTI) crude oil is of a very high quality. It has a light-weight with a low sulphur content. This is why it is often called light, sweet crude oil. This makes it ideal for refining into gasoline, and the best oil such as WTI becomes a benchmark against which all other crude oils are measured. WTI is priced at about a $5-6 per barrel premium above the OPEC Basket crude oil price and is about $1-2 per-barrel above Brent Blend crude.
Brent Blend is actually a combination of crude oil from 15 different oil fields in the North Sea. It is less light and sweet than West Texas Crude but still great for refining into gasoline. Brent crude is generally refined in Northwest Europe. Brent is the major benchmark for all other crude oils in Europe and Africa.
The OPEC Basket Price for crude oil is the average of the prices of crude oil from countries that include Algeria, Indonesia, Nigeria, Saudi Arabia, Dubai, Venezuela and Mexico. OPEC utilizes basket price to monitor world crude oil market conditions. OPEC prices are generally lower because the crude oil from some of the basket countries have a higher sulphur content, and they are referred to as sour and not as good for making gasoline although many other products are made from these oils. In general it cost more to refine these oils.
The NYMEX futures crude oil price is the one seen in most of the mainstream media. It is the value of a 1,000 barrels of oil, and that is usually WTI and is some agreed time in the future.
The NYMEX is a market based forecast of where the oil traders think the WTI spot price will be in the future. The futures price usually trends after the spot price reasonably closely as oil traders cannot forecast unforeseen supply disruptions such as hurricanes, refinery accidents, political unrest and more
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