The Factors of Controling Oil and Gas Prices

Oil has become part of daily life since the industrial revolution. It started from the fuel for energy and electricity to vehicles that people drive daily. Before the solar, wind, and wave energy are used to generate electricity, oil and gas were among the primary sources of energy that many countries used to generate electricity to power their cities. Planes require oil to transport passengers from towns to towns and carry perishable products such as fruits, vegetables, flowers, etc., from one country to another. Compared to other methods of transportation, aircraft is the safest mode. At the same time, one of the most popular transportation styles within the United States is trucks. More than 400,000 trucks companies operate, and their operating cost is heavily dependent not only on the labor expenses but also on the fuel price. Thus, this led to the logistics cost and freight movement throughout the United States heavily dependent on the fluctuation of oil prices.

Without a doubt, to understand the oil price, it is necessary to know how oil is excavated and processed until it is stored in the consumers' gas station. Initially, for an offshore mining site, surveyors are sent out to identify potential reservoirs. Then, spudding is conducted to establish the seafloor's foundation and reach the desired depth for drilling. Then, B.O.P. Stacks are set up on top of the casings placed before, which helps to support further drilling processes. Pipes, bits, collars, and other units are then put to the location to further cut through the rocks. Eventually, natural gas and oil will flow through the pipe and keep the supply consistent. Other than offshore mining, mining on the ground is another method through fracking and eventually producing shale oil, a new technology, and industry in the United States.

Once the oil and gas extracted from the site, it is crude oil and required a refining process to be finally consumed by the engines and types of machinery. The crude oil is distilled through liquid and vapor to different components ranging from the heaviest to the lightest in the distillation tower through heating. The ones at the bottom as gas oil, followed by diesel oil, kerosene, and then petroleum gas and gasoline. Those that are vaporized will eventually fall back to the bottom. Catalysts are also added into the refining process to increase efficiency. Then, after the refining process, the semi-finished products are further treated using different methods such as isomerization, reformer, blending, hydrotreater, hydrocracker, etc., to become the final products such as propane, gasoline, jet fuel, petrochemical products, diesel, kerosene, etc., with different gradings.

There are many oil fields in the United States. At least 50% of the national productions are located in the 100 largest areas and account for $20.6 billion. They are in Eagleville, Spraberry, Prudhoe Bay, Wattenberg, Briscoe Ranch, Kuparuk River, Mississippi Canyon, Wasson, Belrdge South, and Green Canyon. Out of these ten, 4 of them are in Texas. The largest oilfield in Eagleville has a reservoir of 238 million barrels. Whereas the top 10 natural gas fields are in the Marcellus Shale, Newark East, B-43 Area, San Juan Basin, Haynesville Shale, Pinedale, Carthage, Jonah, Wattenberg, and Prudhoe Bay. Two of them are from Texas. Internationally, the largest oil field is in the Marjan complex in Saudi Arabia. It has 17.2 billion reserves. This is followed by Safaniya, which is also controlled by Saudi Arabia. The rest are North Field Expansion in Qatar, Zuluf in Saudi Arabia, and Upper Zakum by the United Arab Emirates. These five most significant oil fields in the world are located in the Middle East.

Since most of the oil is produced in the Middle East, The Organization of the Petroleum Exporting Countries (OPEC) are the main controllers of the global oil price. The pact was established in 1960 by Saudi Arabia, Venezuela, Kuwait, Iran, and Iraq and later it was joined by Qatar, Indonesia, Libya, United Arab Emirates, Nigeria, Algeria, Angola, Gabon, Ecuador, and Equatorial Guinea with some entry and exit throughout the years. The headquarters of OPEC is located in Vienna, Austria. The purpose of the establishment of OPEC is to unify the policies among the member countries to ensure the petroleum supply, income, efficiency, and economy of the industry.

The most recent event that shocks the world is the fall of the oil price. In April this year, the oil price drops to -$38 from $18 a barrel due to overwhelmed storage. This is because of the coronavirus outbreak that causes this decrease and forces the companies to discharge excess reserves. This situation did not last long but recover to $1.10 barrel, which is above zero. The oil price is undoubtedly affected by factors such as market forces, technology progress, unexpected events, geopolitics, and war.  

07 April 2022
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