CRUDE? WHY IT MATTERS?
“Running out of gas? Let’s stop at the next filling station.”
Yeah, it’s that simple. But have you ever wonder that there are so many stories or struggles behind the petrol comes from a simple filling dispenser. Of course, it’s all about crude. When it comes to the word “oil,” almost all the time, we tend to talk about the fuel in our cars. But there are many more other uses of crude. Only about 45% of oil is used as gasoline in states roughly. And the rest is mostly used for Heating oil, Propane, Jet oil, Residual fuel oil, Asphalt, and other products.
Besides the use of crude oil as a source of energy, there are several other importance too, such as Plastic, Clothing, Furniture, Insulation, Kitchen items, and food.
Yeah. You heard me. Crude oil is used to produce non- flammable clothing items when it comes to the use of crude oil for clothing. And the connection of fuel and food depends on the fertilizer used for cultivation of plants.
Now as you can see, Crude oil means a whole lot you ever imagined? Right? It’s not a tranquil escape from a lifestyle based on crude oil. And that is the reason that the price of an oil barrel could change the world it is now.
What exactly Crude Oil is?
Only it is a fossil fuel which is occurred naturally. These have been made by exposing underground organic matter to extreme levels of heat and pressure for a more extended period such as for millions of years. And also it’s a mixture of hydrocarbons in different length, size, and configuration. There are two types of crudes named as sweet crude and sour crude or light crude and heavy crude. This is depending on the Sulphur content of the mix of these hydrocarbons. Therefore these compositions decide the quality of the crude.
Crude oil production plays a vital role in the world economy. It could govern the world as it is one of the most demanding commodity in the world. And that’s why crude oil production and exportation have been a huge turning point of a country’s economy. Also, crude is known as the most in-demand commodity in the world.
There are two significant standards of crude oil known as Brent crude or UK oil and West Texas Intermediate (WTI). United Kingdom’s Brent crude, mostly drilled from North Sea’s Brent, Oseberg, the Forties, and Ekosfisk fields off the shores of the UK and Norway. Brent crude is considered as a quality crude for it’s lower Sulphur content and density. Usually, United States’ West Texas Intermediate (WTI), often drilled in Texas, Louisiana and North Dakota in North America which is having lower Sulphur content and density than UK Brent. And that’s why these are considered as high quality two standards of crude in determining the price of the particular crude oil worldwide. And that is why it is a much vital fact to be aware of.
With the fluctuations occurred from time to time the USA has secured its place as the top country of crude oil production in the world. And it is recorded as 12 Million barrels per day by 2019. Even though it is not enough for the country’s consumption itself. Therefore the USA is not a crude oil exporter also though it is the largest producer in the world.
OPEC is a main organizational body that helps with governing the oil prices. This was formed by a group of large oil producing nations in 1960. And then some certain production quota is set by OPEC for a particular country by considering the demand and the supply for oil in that country. Therefore OPEC’s production could control the oil price when it was the beginning of the crude oil industry as OPEC determined the USA decided the global oil supply and global demand. At that time cost per barrel was about $25 for Brent and $27 for WTI. But with the increment of Asian demand for crude, the price per barrel was rapidly increased about $140 by the end of 2008 for both Brent and WTI.
But with the beginning of the last decade, USA oil production has increased due to the technical advancement in energy consumption and the trend of using renewable sources for energy transformation. And this was able to reduce the global supply of oil by OPEC to the USA which resulting price reduction to $112 for Brent and $105 for WTI by the end of the year 2014. And by the end of the year 2016, the oil prices reached about $36 for both types of crude oil.
Then the OPEC had to increase its production quota for these countries including Russia, the UK, and the USA. And this action leads to an increase in the cost per barrel again to some certain level of $70 for Brent and $65 for WTI by the end of 2018. And then the price level was able to maintain in this particular range so far in 2019. WTI price is maintaining about $62.3 and $71.58 is for Brent is recorded as the current value of a crude oil barrel.
With the history of crude oil production and exportation, it is seen that the crude oil is not just a commodity, but also it could significantly affect the world’s economy in a way no one can imagine which is why it has the power to govern the world’s economy drastically. And also when considering these fluctuations, it is proven that oil prices cannot be easily predicted.
Also, it is better to be aware of the fact that crude is a limited offer from the earth. With the rapid increment of the world population and rapid advancement of technology, this need has gone to it’s highest. But eventually, the world will face the issue of not having enough oil left underground. As the people who are alarmed on this fact, we all should try to adopt the alternatives before it’s too late for the whole world as that date is not so far for sure.