|Gas prices in San Diego. OMG! (Photo credit: slworking2)|
Oil is priced per barrel, with a barrel containing 164 litres, although oil now never sees the inside of a barrel and is transferred directly to and from vessels. In the last century, a goodly number of people have made enormous fortunes from oil, such as the billionaire, J. Paul Getty, and oil could well be the first thing a person trades when they open a spread betting demo account. Oil cost $10 per barrel in 1998, but almost $100 per barrel today. Experts have sometimes predicted that the price would rise to $200 a barrel.
If a commodity is to be valuable, demand for it must exceed supply – there must be scarcity. This is not true of oxygen, but it is very true of oil. It is scarce and rapidly becoming more so. Prices are sure to rise in the long term.
In the short term, however, there can be significant fluctuations in the price of oil of as much as 150 points a day. There was a surge in interest in commodities in the first quarter of last year when uncertainty in the Middle East caused oil to rise in price to more than $100 a barrel. The oil spill from BP's Deepwater Horizon facility in 2010 killed 11 people and was the largest ever accidental oil spill at sea, causing the price of oil to decline immediately afterwards. Oil is subject to weather trends, with hurricanes disrupting production. More oil is used in cars in summer and in heating in winter. The credit crunch has sent the price of oil downwards. Oil is inversely related to the price of the dollar and positively to the price of gold.
The supply of oil can also change for political reasons, as the countries of the OPEC cartel, which produces two thirds of the oil in the world, demonstrated in 1973 when they placed an embargo on the sale of oil to the United States, Western European countries, Rhodesia, South Africa and Japan in response to the United States' assistance to the Israeli military in the Yom Kippur War. The Arab Spring led to reduced supply of oil, most notably by Libya.
The media strongly desires high oil price stories because they sell newspapers. Predictions can be self-fulfilling prophecies: talk of high oil prices causes high oil prices. Specific occurrences of which anyone spread betting on oil should be aware include OPEC meetings and the release of US oil inventory figures every Wednesday at 3:30pm.