How are crude oil prices determined?
Crude oil prices are determined by global supply and demand conditions in international markets. The production policies of the Organization of Petroleum Exporting Countries (OPEC) help determine global supply availability and these policies have an important influence on world oil prices. As a cartel, OPEC attempts to maintain oil prices by restricting its production. Its ability to do so depends on prevailing market conditions, the degree of co-operation from non-OPEC oil producing countries, and its own cohesiveness. Ontario imports virtually all its crude oil, either from Western Canada or from offshore. Ontario refineries must compete with other users for this oil and must therefore pay world prices. The benchmark price for oil is based on a particular crude – West Texas Intermediate (WTI). This is a relatively expensive crude and its price is higher than the price of much of the crude that supplies Ontario. Crude oils command different prices because they vary in quality. In part
