Peel away at almost any story – from milk deliveries to climate change to unrest in Venezuela – and eventually you’ll find a tale about oil. When the price of oil collapsed in 2014, milk got cheaper, Venezuela’s economy plunged into chaos and Americans bought a record number of new cars.
Because of its outsize role in the global economy, and because its price is tracked closely by investors and analysts, there is no shortage of good data available from a host of government and international agencies. This explainer includes resources for reporters seeking a brief tutorial on the oil market and access to up-to-the-minute statistics.
The market
Crude oil is auctioned on international markets like any other commodity and is usually priced in dollars per barrel. Benchmarks include Brent crude (traded on the ICE Futures Europe exchange in London) or West Texas Intermediate (WTI, traded on the New York Mercantile Exchange). Both are light and sweet, meaning that they are low in sulfur and relatively easy to refine into familiar products like gasoline or diesel.
Because you can’t walk into a shop and carry out 1,000 barrels, or transfer it over the internet, oil — like other commodities — is often sold with futures contracts. In a futures contract, the buyer is promised delivery on a specified date at a specified price, usually a few weeks or months out, no matter what happens to the price in the meantime. Bloomberg publishes the latest figures for oil futures, which give reporters a good idea of where analysts and investors expect prices to head. Crude is sometimes sold at spot prices — meaning prices for delivery in a single shipment immediately. These have an enormous bearing on futures prices.
One of the best sources for data and information about energy, prices and trends is the Energy Information Administration (EIA), an arm of the United States Department of Energy. This EIA explainer covers oil-market basics with links to up-to-date data on the supply of oil, natural gas, coal and other energy sources. This one discusses how the price of oil translates into what you pay at the pump. And this regularly updated outlook offers predictions for energy prices in the short-term.
What affects the price?
Many factors can sway the price of oil: the rate of China’s economic growth, a winter storm in New England or violence in the Niger Delta. Analysts who study political risk in oil-producing countries are in high demand, but consumer nations can have an impact on the price as well.
In late 2014, the price of oil dropped from around $110 a barrel to less than $50, where it has hovered since.
This shock came in response to a number of factors. The preceding years saw a boom in the use of hydraulic fracking to unlock oil supplies in shale-rock formations. This rapid technological advancement accompanied a glut in America’s Strategic Petroleum Reserve, a government-owned stockpile that authorities use to stifle price volatility or as a supply during an emergency.
Indeed, the U.S. has a growing influence on the international price of oil. Producers in the U.S. can turn on their pumps whenever oil rises above a threshold that makes pumping (or fracking) profitable. The threshold shifts, but many analysts believe it is around $50 per barrel. If a barrel falls below $50, these “swing producers” have less of an incentive to pump. When they pump less, there is less oil on the market, causing the price to rise. When it rises, they pump more, adding to global supply and thus bringing the price down again. As the Wall Street Journal explained in April 2017, “production cuts by the major producing nations have limited price declines while growing U.S. supply has held rallies in check.”
For oil exporters, the downturn has been bleak, pummeling the value of their currencies and thus driving up the cost of imports, such as food. Russia’s ruble fell about 50 percent as the oil price tanked that year. Saudi Arabia has struggled to meet its social commitments. Venezuela has hovered on the edge of revolution for years.
For major consumers, like the U.S., the fall dampened inflation because basic goods (like milk) no longer cost as much to transport to market. It also helped strengthen the value of the dollar, driving down the price of imports. The 2014 oil crash was seen as largely positive for the U.S. not because it is the world’s second largest oil producer (after Saudi Arabia), but because it is the world’s number-one importer. (Of course, the fall hurt the stock prices of oil majors, like ExxonMobil, which saw almost $100 billion wiped off its market value in the last six months of 2014.)
The Organization of the Petroleum Exporting Countries
For decades after it was founded in 1960, OPEC, a cartel of 13 major producers in the developing world, helped set the global price of oil. Because members are major exporters, it is in their interest to keep production low so prices remain high.
OPEC played a role in the 1973 oil embargo, when a number of Arab members, in response to American support for Israel in the Arab-Israeli War, cut production and banned supplies to the U.S. The embargo sent prices in the West rocketing, caused extensive shortages in the U.S. and dramatically boosted inflation.
These days, OPEC’s influence is waning. Members are hurting since prices tumbled in late 2014, yet the group has struggled to agree with non-members on production cuts to boost prices. In short, it is no longer a swing producer able to influence markets.
“OPEC produced about 42 percent of the world’s crude oil from 2000 to 2014,” says the U.S. Department of Energy. In 1972 the cartel’s share peaked around 56 percent of global supply, according to its own figures.
Former White House energy adviser Robert McNally was blunt when asked if the cartel was dead in April 2017. “OPEC is not dead. They have a beautiful building. I go there. There will always be a forum for having them come and meet. But in terms of OPEC being the swing producer — yes. In the last 10 years, we’ve needed a swing producer, and we haven’t had one,” McNally said on American Public Media’s Marketplace in April 2017.
One thing still breathing is OPEC’s Monthly Oil Market Report, which is full of statistics on the industry.
Other data sources
The International Energy Agency, a forecaster representing oil-consuming countries, circulates tons of data. Here’s an easy-to-read book of key energy statistics. It notes, for example, that the U.S. is the world’s top producer of natural gas, but that it’s not an exporter. This vast Excel spreadsheet includes data on imports, exports and total production of various types of energy around the world since 1971. It shows that despite its vast production capacity, the U.S. imports more natural gas every year than many other countries.
Other resources
- Daniel Yergin’s Pulitzer Prize-winning 1990 book The Prize is an engrossing history of the oil industry.
- A 2017 study in World Development found fossil-fuel subsidies account for 6.5 percent of the global economy. Eliminating subsidies would dramatically reduce carbon emissions.
- We reviewed research on fracking and earthquakes in this 2017 review.
- This 2017 paper in the American Economic Journal discusses how sudden spikes in the price of oil can hurt skilled workers’ wages.
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