The price of several crude oil benchmarks have dropped by more than 50 percent since June. (Crude oil benchmarks are groups of types of crude oil that are commonly purchased and sold around the globe.)
Oil is bought and sold all around the world. Its price is determined by how much oil there is to sell (the supply) and the amount of oil people need (the demand). Firstly, we are talking about crude oil and products from it. Crude oil comes from the earth, as opposed to food oils like olive oil or sunflower oil – no points for guessing where those come from! We humans are very dependent on crude oil – it drives our cars, lights up our homes, grows our food, and many many more things.
Major oil exporting nations, such as Saudi Arabia and Russia, are still producing as much oil as they used to, but global demand for oil is falling. One of the reasons is that the economies of several countries around the world (such as China, a big importer of oil) have slowed down, and they have reduced their imports of oil. Another reason is that the United States, a huge importer of oil, has now started producing a lot more oil within the country so it doesn’t need to buy as much from other nations. Oil supply is high but demand is lower, and hence it’s cheaper.
Crude oil is usually found buried in the ground. This oil is formed from the remains of animals and plants that lived in a water environment millions of years ago. Over time, the remains of these animals and plants were buried under layers of sand. The pressure and heat from these layers turned the remains into “crude oil”. Holes are drilled in the ground to get the oil out. Once this oil is dug up, it goes to a refinery where it is converted into usable products such as petrol (gasoline) for our cars, diesel for our trucks, and other products.
Here are a couple of oil jokes:
What’s the hottest letter in the alphabet?
‘B’, because it makes oil…Boil!
What animal needs oil?
The mouse, because it squeaks.
Here are three videos about crude oil.
Did you know?
According to data from 2012, the United States is the largest consumer of oil (about 18 million barrels per day) followed by China (about 10 million barrels per day). The world consumes about 90 million barrels per day. One barrel of oil is 42 US gallons or 159 liters.
Image Credits: http://www.eia.gov/ for Oil production image and barrel image, http://www.castlemetalseurope.com/ for crude oil’s image
Sources: www.iea.org, http://www.eia.gov/