If there is one commodity that has shaped history and shaped landscapes more than anything else – even more than rivers, which have been one of the great anchors of civilization over time – it is oil.
Over the years, oil, or ‘black gold’ as it was called in the early 1900s, was one of the most reliable sources of energy. It has powerful industries, homes, and transportation.
Last week, the United States of America attacked Venezuela, which has the largest oil reserves in the world – even more than Saudi Arabia. Although President Donald Trump may say that the military offensive was aimed at improving the population (despite the abundance of natural resources, the quality of life has continued to sink in the country) and the fight against narco-terrorism sponsored and supported by President Nicolas Maduro Moros, many experts and political leaders see this as nothing more than ‘taking oil’.
There are several types of crude oil. Venezuelan crude is different – it’s heavy and sour. In fact, some call it ‘too hard’. It is difficult to refine, and is mainly used to extract diesel, asphalt and industrial oils and other heavy materials.
Some crudes are lighter and sweeter, and more desirable, such as West Texas Intermediate (WTI) and Brent crude. These are low in density, hence ‘light’, and low in sulfur content, hence ‘sweet’. These are easy to refine, making them marketable, and are used to produce gasoline, kerosene, and pharmaceutical products.
Here’s a simple glossary on crude oil, the single biggest cause of many wars since the first commercial oil well was drilled in Pennsylvania in 1859…
What is crude?
Simply put, crude oil is a mixture of hydrocarbons that exist in the liquid phase in natural reservoirs underground. These are made of fossils of animals and plants that lived millions of years ago. Their remains were covered in layers of sand, mud, and rock and the heat and pressure of the Earth formed what we now call crude oil or petroleum.
However, not all oils are the same. Some of the crude is easily converted into gasoline and jet fuel. Some fight with refiners all the time. Some barrels are so valued, they can change world politics
Green species
Here’s how oils get their labels – light, heavy, sweet, sour – based on their characteristics.
Crude oil is rated by how thick it is and how much sulfur and other impurities it carries. Those factors determine how valuable it is, how difficult it is to refine, and which countries and companies are willing to buy it. It is also coordinated by geography where it has been tested.
Some countries are sitting on significant greenbacks. Grades like Bonny Light (Nigeria), Tapis Crude (Malaysia), Murban (Abu Dhabi), Brent, and WTI are light and sweet. Refiners pay a premium. The hard, sour ones from places like Canada and Venezuela are hard to handle. It requires special filters and more energy to clean, so it often sells at a discount.
Great benchmarks
Then there are three main rates of world crude oil, or reference prices used by buyers and sellers in the international oil market. The three largest are – Dubai Crude, Brent Crude, and West Texas Intermediate (WTI) – named after their origin.
WTI is mostly drilled in the closed US states (mainly Texas and North Dakota). It’s simple and delicious. The sulfur content is about 0.24 percent. Prices are pegged to the New York Mercantile Exchange (NYMEX).
Brent is viewed from the North Sea (UK, Norway) and can be easily transported. It’s light and sweet too, and the most expensive of the three benchmarks. It follows the Global benchmark Intercontinental Exchange (ICE) and represents two-thirds of the world’s oil.
Dubai, from the Middle East, is an important brand for Asian refiners. It is heavy and moderately sour with more than 0.5 percent sulfur. It is usually priced lower than Brent and WTI with its price linked to Brent. Saudi Arabian oils are generally light and sweet.
