How are Crude Oil Prices Set?
You can’t pin this one on Saudi Arabia, or OPEC — they are simply benefactors of a very complex international market. Like all other commodities, the price is set based on supply and demand. If the only players in the market were oil producers and refiners, the market would be very well behaved and would be far more responsive to real consumer demand. It used to be that the prices would be determined by a balance between the prices on the spot market (shipments of crude oil that are on the way to refiners but, for whatever reason, become available for sale) and the price refiners can get for their total product slate on the wholesale market. Spot prices would be determined by looking at the recent prices paid for shipments as reported in a couple of industry newsletters, such as the Oil Daily. The introduction, and recent popularity, of crude oil and refined product futures trading changed the market. Here, traders who have no possible way of receiving or refining crude oil purchase c
