Oil as a Commodity

Hello there, this is tradingpedia.com and in this video continues our series dedicated to trading oil. So far, in the first part, we have discussed what is oil and what to consider when trading oil.

The Importance of Oil

No discussion about oil and the oil industry is completed if we do not understand the importance of oil, of the product. Many people think of oil as only being used for fueling our cars or the jet plane, and so on. However, the truth is that oil has many other uses.

The notion of a barrel of oil comes from the time when oil was discovered in the late 1800s and back in those days wood barrels were used to transport it. This remained the standard measure to this day, and totals across all producing countries are measured in million barrels a day.

Products Made From Oil

What products are made from a single barrel of oil? Many. Think of distillate fuel to drive a large truck 40 miles, or 4 pounds of charcoal briquets, or asphalt, etc. There is even enough to produce 70kwh of electricity, gasoline for driving a medium size car to drive 280 miles, etc. More importantly, after making all the above and more, as I did not mention everything, there is still enough left for the petrochemical industry to make 39 polyester shirts, for example, and so on.

What we do know is that we use it mostly the gasoline – this is the first thing that comes to mind. But it also used to power boats and other small engines. Also, we know that the aviation industry depends on kerosene. The aviation industry is responsible for long-term rising trends into the oil industry consumption despite the fact that the recent pandemic made it difficult for the industry.

Another important source of demand for the oil industry is the shipping industry. This industry is the core of global trade. Everything you know about globalization will not be possible without oil. Think of it as the backbone of world economic growth.

The trend in the developed world is to focus more on renewable energy and reducing the dependency on oil. Yet, in some industries, that is not possible. Therefore, the demand for oil still exists and the price of oil will still impact our lives.

If from one barrel of oil all these are possible, you have to imagine the forces at stake when it comes to find and extract oil. Think of refineries, pipelines, all the infrastructure needed to bring oil to different by products.

Also, different types of oil exist. This is why you will hear sometimes that oil prices changed. Well, if there is only one product, it cannot have two prices. But we talk about Brent crude oil, WTI crude oil, and even OPEC oil.

Conclusion

So, when you think of oil, think of an industry vital for countries like Canada, for instance. Therefore, before moving forward, think of oil as responsible for gasoline, kerosene, and the shipping industries – to name the first ones to come to people’s mind. Stay tuned for the next part – bye, bye.