Environmental Engineering Reference
In-Depth Information
immediately
, whatever the cost. But oil is nevertheless by far the most
important of traded energy products. So the world really felt it when
crude oil rose briefly to a record $147.27 a barrel on 11 July 2008 on the
New York Mercantile Exchange. On the way to that record high, there had
been the largest daily increase ever in the oil price, of $10.75 on 6 June of
that year. That daily increase was higher than the total price of a whole
barrel ten years earlier. Likewise, on the way down there was a record drop
for one day, of $14.31 on 23 September.
The run-up in the oil price to mid-2008 and then the seventy percent
plummet in the price by the end of 2008 has prompted calls, particularly
in the US and particularly in Congress, for tighter curbs for speculative
oil trading and greater transparency in the futures markets. Some changes
are likely, and may be mirrored in Europe, even though a US inter-agency
task force concluded in June 2008, as the oil price was reaching its peak,
that “current oil prices are being driven by fundamental supply and
demand factors”.
Oil benchmarks
World oil-trading revolves around three benchmark products chosen for
high quality and convenient location. They are “West Texas Intermediate”,
or WTI, traded primarily on the Nymex in New York; “Brent” (origi-
nally from the North Sea's Brent field, but now a mix) traded primarily in
London, and “Dubai” traded in - you guessed it - Dubai in the Gulf. The
money spent on trading futures in these products is enormous. Take the
Nymex (New York Mercantile Exchange):
The daily average volume of crude oil trades for 2008 was 532,309.
Each crude oil contract is for 1000 barrels.
The average daily price during 2008 was $99.73.
So the amount spent trading crude oil on an average day on the Nymex in
2008 was $53.087 billion (532,309 x 1,000 x $99.73). Not exactly peanuts.
Another way of illustrating the magnitude of oil trading is to look at
the balance sheet of BP. In contrast to ExxonMobil (which just tends to
trade its own oil), BP sees trading other people's oil as well as its own as a
general opportunity to make money. BP's sales turnover for 2008 totalled
$361bn. Of this, $44bn came from upstream production operations
(usually the most profitable part for the big oil majors), and all the rest -
$317bn - was from downstream operations such as refining, marketing,
