Essay on How Oil Prices are Established - 1367 Words

How Oil Prices are Established Did you realize that at our current consumption of crude oil and at our current status of known reserves, we have approximately 40 years of reserves remaining? This is a startling fact when we take into account all the products that are produced from refined crude oil or from its by-products. Many people are aware of the price increases they feel at the gas pump, but has anyone ever considered the cost or investment put forth in finding new reserves? Under the right conditions, oil would sometimes seep up to the surface, but in our times, the search for new reserves is more costly and dangerous. When considering how the price of crude oil and its by-products are determined, one must first look at the†¦show more content†¦Through various news sources, there has been reported an increase in weather occurrences that cause temporary shortages in crude oil production. The largest of these occurrences has been from hurricanes. When a hurricane is reported and the path is determined to cross through offshore oil platforms, all production must be stopped and crews evacuated for their safety. Only once danger has passed, will production resume. This sometimes can be just a few days or longer, depending on if any damage has occurred. In 2005, the Gulf of Mexico experienced two hurricanes that devastated offshore and onshore oil production facilities. Offshore oil platforms were broken from their moorings and driven to shore, and onshore refineries suffered tremendous damage from flooding and high winds. Another weather occurrence that can have a dramatic influence on pricing is the onset of winter. Rather than winter weather causing supply shortages, the demand increases from consumers requiring fuels for heating. However, weather is not the only factor that influences pricing. With most of the known reserves currently producing and slowly depleting, the search for newer sources takes the producers into areas originally thought too harsh or uneconomic to tap. When the oil and gas industry was in its infancy, crude oil could be found in pools on the ground surface. This was caused by cracks in the geological formation. As crude oil isShow MoreRelatedEssay about Monopoly of Petroleum: OPEC1037 Words   |  5 PagesThis essay will discuss the monopoly of petroleum by The Organization Of Petroleum Exporting Countries (OPEC), particularly how it controls the price of petrol, threats to its monopoly and the social costs involved. OPEC was established in the 1960s and ever since, Saudi Arabia gained a reputation of being the major power of the organization. Saudi Arabia has the biggest oil reserves in the world and production costs lower than any country. 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