At this stage of the introduction to crude oil science and technology and in keeping with the historical aspects that have been discussed earlier, a word (or two) about crude oil pricing and the historical perspectives is warranted.
Currently oil is the primary energy source in the world. For a century the world has depended on low-cost oil to stimulate and maintain economic growth (Yergin, 1991). However, sustaining the rate of economic growth is open to question because the volume of oil that can ultimately be recovered is subject to much speculation because of the uncertainties of reserve estimation and this, in turn, affects the price of oil.
At this stage, it is appropriate to deal with a related topic and tat is crude oil prices. However, it is not the intent here to move into predictions of the future. There is nothing difficult about making predictions. But predictions of future events are always difficult! It is difficult to be correct! Everyone can justify with amazingly accurate 20-20 hindsight why his/her predictions were incorrect. But they are never incorrect. These erstwhile mediums will use statistics to show that, after several rounds of mathematical manipulation, that their predictions were very close. Even though the outcome bears no relationship to what really happened, it is easy to make a statement that oil prices will continue to rise (after all, the pessimist is never disappointed), but the predictability is determining when and by how much.
Therefore, it is the purpose of this section to forgo any predictions. It is, however, the purpose of this section, to present a brief history of oil prices from which the reader can make his/her own predictions.
References to the oil price are usually either references to the spotprice of either West Texas (light) crude oil traded on New York Mercantile Exchange (NYMEX) for delivery in Cushing, Oklahoma, or the price of Brent crude oil traded on the International Petroleum Exchange (IPE) for delivery at Sullom Voe.
Briefly, the price of a barrel of oil is highly dependent on both its grade (which is determined by factors such as its specific gravity or API and its sulfur content) and location. The vast majority of oil will not be traded on an exchange but on an over-the-counter basis, typically with reference to a marker crude oil grade that is typically quoted via the pricing agency IPE claim that 65% of traded oil is priced off their Brent benchmarks. The Energy Information Administration (EIA) uses the Imported Refiner Acquisition Cost, the weighted average cost of all oil imported into the United States as the world oil price.