oil industry: articles

Petroleum

Naturally occurring fossil fuel formed over millions of years from dead organisms under heat and pressure.

Uses of Petroleum

Powers vehicles, machines, heating, and produces plastics; central to the global economy and geopolitics.

Non-renewable

Finite supply; environmental impact includes carbon emissions, ecological damage, and pollution.

Upstream Industry

Explore and extract oil.

Midstream Industry

Transport and store oil.

Downstream Industry

Refine and distribute products.

Top Oil Reserve Countries (2025)

Venezuela (303B barrels), Saudi Arabia (267B), Iran (208B).

Developmental Drilling

Taps known reserves.

Exploratory Drilling

Searches for new reserves.

Directional Drilling

Targets known reserves vertically.

Advantages of Petroleum

Stable energy source, versatile, high energy-to-weight ratio, easy to extract and transport.

Disadvantages of Petroleum

Non-renewable, polluting, environmentally harmful extraction and transport.

Direct Investment

Oil futures or options.

Indirect Investment

Energy sector ETFs and mutual funds (e.g., VGENX, FSNGX, PXE, FCG, IEO).

Alternatives to Petroleum

Wind, solar, biofuels (vegetable oils and animal fats).

Historic Importance of Petroleum

Formation and extraction shaped industrial economies and geopolitics.

Influence of Key Countries

Countries with large reserves historically influence global energy markets.

Environmental Impact of Petroleum

Non-renewable nature and environmental impacts have prompted exploration of alternative energy.

What drives crude oil prices?

Global supply and demand, strongly influenced by economic growth.

What percentage of global energy use is supplied by petroleum fuels?

About one-third.

How does OPEC influence oil prices?

By setting production quotas.

What percentage of global oil reserves does OPEC control as of 2021?

Approximately 72%.

What percentage of global crude oil is produced by OPEC?

About 37%.

What is spare production capacity?

Oil that can be produced within 30 days and sustained for 90 days.

Which country holds most of the global spare production capacity?

Saudi Arabia.

What causes price volatility in oil markets?

Oil supply and demand are inelastic in the short term.

Name a major historical disruption that affected oil prices.

The 1973-74 Arab Oil Embargo.

What role does political instability play in oil supply?

It can negatively affect oil supply.

What are futures markets in oil trading?

Markets that lock in future prices for producers, consumers, and speculators.

What are spot markets in oil trading?

Markets that sell oil for immediate delivery.

What factors contribute to the uncertainty of oil price forecasting?

Economic, political, and environmental factors.

What does EIA stand for?

Energy Information Administration.

What is the primary function of oil markets?

To function as a global auction for oil.

What can raise oil prices aside from political instability?

Hurricanes, cold weather, refinery outages, and pipeline failures.

What happens to price spikes after supply chains recover?

Price spikes usually ease.

When was OPEC founded?

1960

Which countries founded OPEC?

Iran, Iraq, Kuwait, Saudi Arabia, Venezuela

What was the purpose of OPEC's formation?

To stabilize oil prices and coordinate production

What event led to the formation of OPEC?

Price cuts by Western oil majors due to rising Soviet oil output

What internal issue did OPEC face in its early years?

Internal disagreement over export limits

What was the outcome of the 1967 Six-Day War for OPEC?

An attempted oil boycott failed due to lack of unity

What did the 1968 Declaratory Statement assert?

National sovereignty over natural resources

How did OPEC's membership change in the 1960s?

Membership expanded but control weakened by new oil discoveries

What was OPEC's market share by 1973?

56%

What event triggered the Arab oil embargo in 1973?

Yom Kippur War

What were the consequences of the 1973 oil embargo?

Shortages, price spikes, rationing, and a shift in global power

How did OPEC function in the 1970s?

As a cartel, not a monopoly

What limited OPEC's effectiveness in the 1970s?

Dependence on Western refining and transport

What major event in the 1980s affected OPEC's supply?

Iranian Revolution and Iran-Iraq War

What did high oil prices in the 1980s encourage?

Alternative energy sources and non-OPEC production

What caused the 1986 oil price crash?

Oversupply

What event in 1990 disrupted OPEC's supply?

Iraqi invasion of Kuwait

What caused short-term supply shocks in 2003?

Iraq War

What factors constrain OPEC's influence today?

Internal divisions, non-OPEC supply, and energy diversification

What factors influence oil prices?

Oil quality, location, and transport access.

Why does light oil get higher prices?

It is cheaper to refine.

How do transport costs affect oil prices?

They lower the price producers receive.

What is Brent?

A global benchmark for oil prices in Europe, Africa, and the Middle East.

What characteristics of Brent lead to high prices?

It is light, sweet, and has coastal access.

What is WTI?

The U.S. benchmark for oil prices, located in Cushing, Oklahoma.

Why does WTI have a discount to Brent?

It is landlocked, has export limits, and faces oversupply.

What is WCS?

A heavy oil blend that is discounted to WTI due to being heavier and farther from markets.

What is Dilbit?

A mixture of bitumen and diluent that is heavier than WCS and discounted to WCS.

What is bitumen netback?

The price of bitumen after transport and diluent costs.

What determines revenues and royalties for Alberta oil?

They are based on netback, not Brent or WTI prices.

Why does Alberta oil earn lower prices?

Due to quality and distance from markets.

How can better market access affect oil prices?

It can reduce price discounts.