# Crude Oil Pricing

The price of oil, or the oil price, generally refers to the spot price of a barrel of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent ICE, Dubai Crude, OPEC Reference Basket, Tapis Crude, Bonny Light, Urals oil, Isthmus and Western Canadian Select (WCS).

Crude oil is a type of fossil fuel which occurs naturally. It is an unrefined petroleum product composed of hydrocarbon deposits and other organic materials.

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## Factors Affecting the Crude Oil Pricing

There is a difference in the price of a barrel of oil based on its grade. Discussed below are the factors which are responsible for the increase or decrease in the crude oil pricing in India:

• Its specific gravity or API
• Its sulphur content
• Its location—for example, its proximity to tidewater and/or refineries. Heavier, sour crude oils lacking in tidewater access—such as Western Canadian Select— are less expensive than lighter, sweeter oil—such as WTI

### Types of Crude Oil

There are over 100 crude oils which are traded internationally. However, there are two which are the most common:

1. West Texas Intermediate (WTI)
• It is a high quality crude and is excellent for refining for maximizing of Petrol
• It is a light crude with API gravity of 39.6 degrees
• The presence of 0.24 percent of sulphur, makes it a sweet crude
2. Brent
• It is a combination of crude oil from 15 different oil fields in the Brent and North Sea areas
• It is a reasonably “light” and sweet crude oil with API gravity of 38.3 degrees
• Comprises 0.37 percent of sulphur
• It is is ideal for making Motor Spirit (Petrol) and middle distillates

### Crude Oil Pricing in India

• India’s domestic crude oil production in July 2019 was 2,769 thousand tonne (TMT), and in 2017, India had 600 million metric tonnes (MMT) of proven oil reserves
• In 2020, crude oil pricing nosedived from an average of about $55 per barrel to$20 by the end of March due to the slumped demand during the COVID-19 pandemic

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### What are the factors affecting crude oil prices?

Demand: Constantly on the rise.
Supply – Iran factor and low spare capacity.
Inventories – Have dropped significantly; Demand is higher than supplies.
Capital Expenditure: Future supplies at risk.
Geopolitical Risks: Iran factor and potential trade wars.

### What’s the major factor that affects the supply of oil?

Crude oil prices are determined by global supply and demand. Economic growth is one of the biggest factors affecting petroleum product—and therefore crude oil—demand. Growing economies increase demand for energy in general and especially for transporting goods and materials from producers to consumers.

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