The prices of several crude oil benchmarks have dropped to their lowest levels since 2009. (Crude oil benchmarks are groups of types of crude oil that are commonly purchased and sold around the globe.) For example, Brent Crude, one of the main international benchmarks, was over US$100 a barrel in June of last year. Now it is around US$40 a barrel. (A barrel of oil is equal to 159 litres, 42 US gallons, or 35 imperial gallons.)
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, 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 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.
Here is a video about crude oil.
Did you know?
According to data from 2013, the United States is the largest consumer of oil (about 19 million barrels per day) followed by China (about 10 million barrels per day). The world consumes about 91 million barrels per day.
Image Credits: U.S. Energy Information Administration for the oil barrel image, http://priceofoil.org/ for the barrel of oil with money image
Sources: http://commodityhq.com/, BBC, http://www.iea.org/, http://www.eia.gov