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How Oil Became The World’s Most Valuable Commodity [Plus Global Oil Consumption Clock]

What Is Oil, How Is Oil Used & Why It's Critical To The World Economy

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What Is Crude Oil?

Crude oil is unrefined petroleum. Crude oil occurs naturally and is predominantly composed of hydrocarbon deposits. Crude oil is valuable because it can be refined to produce everyday products such as gasoline, diesel and a multitude of petrochemicals. Another reason it is considered valuable is because it's non-renewable making it a finite resource.

Looking to trade oil? See our oil trading guide

Why Is Crude Oil So Valuable?

Before the Industrial Revolution, agricultural staples like corn and wheat ruled the commodities market. Today, however, crude oil and its derivatives are the most actively traded commodities in the world.

That’s not surprising, considering oil touches just about every aspect of the global economy, in terms of consumer goods themselves as well as their production and transportation.

If you think of oil mainly as fuel to power cars, trains, jets, and ships, you’re only seeing a tiny piece of the puzzle.

Oil is a major component in the manufacture of:-

  • Plastics
  • Synthetic textiles (acrylic, nylon, spandex, polyester)
  • Fertilizer
  • Computers
  • Cosmetics
  • Steel

In fact, less than half of a 42-gallon barrel of oil actually goes to fuels production; the rest is used to make consumer goods.

It’s estimated that the average American uses about three gallons of petroleum products per day.

How Much Oil is Used Per Day?

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What Are the Different Types of Crude Oil?

Although the market for oil is global, oil trading has clustered around several primary regions. The crude oil in each of these regions has slightly different characteristics, typically referred to in terms of viscosity (light versus heavy) and sulfur content (sweet versus sour).

Each of the major trading regions has established benchmarks to track price movements in oil commodities:

  1. West Texas Intermediate (WTI), which is a light sweet crude oil, with gravity of around 40 on the American Petroleum Institute (API) gravity scale and low sulfur content.
  2. Brent Crude is a light sweet crude oil from the North Sea. Its gravity is similar to WTI, but its sulfur content is slightly higher. From an oil investing point of view, it’s closest in quality to WTI.
  3. Dubai Crude, also known as Fateh, is denser (heavier) than both WTI and Brent and has a higher sulfur content, making it a sour crude. It’s useful in oil trading as a benchmark for oil shipments in the Middle East.
  4. OPEC Reference Basket is the weighted average of the mix of crudes produced in the OPEC region. It is heavier than both WTI and Brent.
  5. Bonny Light is a light sweet crude from Nigeria that’s useful as a benchmark for African oil. Its properties are similar to WTI and Brent, and in fact, demand for Bonny Light is primarily driven by European and American oil refineries.
  6. Urals is a heavy sour crude representative of Russia’s oil exports.

West Texas Intermediate (WTI)

  • Light sweet crude oil
  • Gravity of around 40 on the American Petroleum Institute (API) scale
  • Low sulfur content

Brent Crude

  • Light sweet crude oil from the North Sea
  • Gravity is similar to WTI, but sulfur content is slightly higher
  • Closest in quality to WTI.

Dubai Crude

  • AKA “Fateh”
  • Denser (heavier) & higher sulpher content than both WTI and Brent
  • Sour crude
  • Benchmark for oil shipments in the Middle East

OPEC Reference Basket

  • Weighted average of the mix of crudes produced by OPEC
  • Heavier than both WTI and Brent

Bonny Light

  • Light sweet crude from Nigeria
  • The benchmark for African oil
  • Similar to WTI and Brent
  • Demand primarily driven by Europe and US


  • Heavy sour crude
  • Representative of Russia’s oil exports
oil rig
Deepwater drilling is a common way to extract oil from under the ocean. There are There are approximately 3400 deepwater wells in the Gulf of Mexico alone. Image via Pixabay.


Oil Price: What Price is Oil Trading At?

Read our guide to start trading oil today

Canadian Crude Index

Brent Crude

West Texas Intermediate

What Affects The Price of Oil?

In financial terms, oil is a “fungible” commodity, which means that specific grades of oil are identical for oil trading purposes, regardless of where they were produced. For example, a contract for 1,000 barrels of WTI crude will be exactly the same product whether the oil was extracted in Texas or North Dakota.

As with all commodities, supply and demand play a major role in oil pricing, although the global pool of oil and the ease with which oil moves around the world levels some of natural price pressures of supply and demand. It also tends to somewhat limit the influence of one particular producer or other in the global market.

Dubai oil wealth
Oil reserves in the Middle East have enabled countries like UAE to rapidly build infrastructure and invest in a future after oil. Image via Pixabay.

In addition, new resources have come online, specifically Canadian oil sands and U.S. shale oil, which add to the global supply, exerting downward force on oil prices in times of heavy demand. However, extraction costs for these resources mean these oils are only competitive in a lower supply and therefore higher price environment.

That said, the International Energy Agency (IEA) predicts growing global demand buoyed by an increasing world population, increased energy consumption in developing countries, and growth in the road transportation, petrochemical, and aviation industries. Even though OECD (Organisation for Economic Cooperation and Development) countries are reducing their road transportation oil consumption on a per-vehicle basis, the growing automobile fleet in developing countries far outpaces those minor reductions.

A (Brief) History of Oil

Please use the arrows below to scroll through the slides.

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Which Countries Are The World's Major Oil Producers?

Map showing biggest oil producer

Top 10 Oil Producing Countries

RankCountryFlagOil Production (Barrels per day)
#2Saudi ArabiaFlag of Saudi Arabia10,460,000
#4IraqFlag of Iraq4,450,000
#5IranFlag of Iran3,990,000
#7CanadaFlag of Canada3,660,000
#8UAEFlag of UAE3,100,000
#9KuwaitFlag of Kuwait2,900,000
#10BrazilFlag of Brazil2,500,000

Top 10 Countries by Oil Reserves

RankCountryFlagProven Reserves (millions of barrels)
#1VenezuelaFlag of Venezuela316,000
#2Saudi ArabiaFlag of Saudi Arabia266,000
#3CanadaFlag of Canada170,000
#4IranFlag of Iran159,000
#6KuwaitFlag of Kuwait102,000
#7UAEFlag of UAE98,000
#9LibyaFlag of Libya48,000

What Are Shale Oil & Fracking?

You may not have heard of the term shale oil but chances are you've heard about fracking (or hydraulic fracturing) which is the process used to obtain shale oil. It gets a lot of bad press but like it or not, shale oil is a key part of our energy supply chain now and looks set to grow in importance as other reserves are depleted.

In 2016, an estimate by the World Energy Congress set total world resources of oil shale at a little over 6 trillion barrels. It is hard to know whether that is a big number without some context so to give you some idea the world's other proven oil reserves are estimated to be 1.7 trillion barrels.

Here's a video that explains fracking:

Where in the World is Shale Oil Found?

shale oil rich nations

Top 10 Shale Oil Rich Nations

RankCountryFlagShale Oil Reserves (Millions of Barrels)
#3ChinaFlag of China32,000
#4ArgentinaArgentina Flag27,000
#5LibyaFlag of Libya26,000
#6VenezuelaFlag of Venezuela13,000
#7MexicoFlag of Mexico13,000
#8PakistanFlag of pakistan9,000
#9CanadaFlag of Canada9,000
#10IndonesiaFlag of Indonesia8,000

Further Reading

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