Trading and Price Discovery for Crude Oils: Growth and Development of International Oil Markets

This book provides a historical perspective on the international oil market, explaining how it has been monopolized by companies and governments for most of its history and how market power is the key to understanding oil prices. It also explores how oil traders, consuming nations' policies, and the US price of oil have influenced the market, and how AI has changed the way markets operate.

Format: Hardback
Length: 252 pages
Publication date: 21 May 2021
Publisher: Springer Nature Switzerland AG

This captivating book delves into the intricate world of the international oil market, offering a comprehensive historical perspective on its emergence, development, and current status as the largest commodity market globally. While the oil market may be mature and complex, it is far from perfect, having been predominantly monopolized by companies and governments for most of its 150-year history. However, for a brief period, oil traded in a relatively free market, leading to the emergence of "big oil," economic shocks, high oil prices, instability, and conflicts.

Understanding market power is paramount in comprehending the dynamics of oil prices. This book employs a straightforward concept of price-makers and price-takers to explore the evolution of oil markets, their structure, and prices. In the early decades of the oil industry, competition was fierce, with low barriers to entry. However, a mere 25 years later, the Standard Oil company established a refining monopoly, purchasing oil at its own "posted price." Over the subsequent century, a cartel of major oil companies, aided by their governments, replicated this practice on a global scale.

The Organization of Petroleum Exporting Countries (OPEC) played a significant role in helping producing governments regain control over their resources. However, the organization was unable to maintain a similar level of control. Following the 1986 price collapse, OPEC relinquished its price-making function, shifting its focus to market influence. While it continued to make attempts to influence prices, OPEC had to align its official prices with one of the global oil benchmarks.

The modern international oil markets thrive on the foundation of oil benchmarks such as Brent, WTI, and Dubai. These benchmarks serve as reference points for oil pricing, providing transparency and stability to the market. This book showcases the pivotal role played by oil traders in the development and evolution of the international oil market. It sheds light on the strategies employed by traders, the impact of geopolitical events on prices, and the challenges faced by policymakers in navigating the complex terrain of the oil industry.

In conclusion, this book offers a valuable insight into the history, structure, and dynamics of the international oil market. It provides a comprehensive understanding of market power, the role of key players, and the impact of geopolitical events on oil prices. By examining the past and present, this book offers valuable lessons for other commodities and sheds light on the potential for a more sustainable and equitable future in the global energy landscape.

Weight: 590g
Dimension: 216 x 243 x 24 (mm)
ISBN-13: 9783030717179
Edition number: 1st ed. 2021