Whether or not you follow oil markets, you will likely have seen articles in the media lately claiming that the price of oil has fallen to $20, or that it could possibly fall to $10. The truth about the oil market, however, is far more complex than that. The number quoted in media headlines usually refers to one of two types of crude oil. Often it is the price of West Texas Intermediate (WTI), also known as Texas light sweet, a benchmark for light oil that is generally produced in the Permian Basin in Texas. It can also refer to Brent Crude, a benchmark for sweet light oil extracted from the North Sea which prices two-thirds of the world’s internationally traded crude supplies. But to say ‘oil prices’ have just hit $20 is entirely inaccurate when referring to different international blends.

The price of much of the oil in Canada is far lower than either Brent or WTI at the moment, with Western Canadian Select currently priced at just over $6. Meanwhile, oil blends from Indonesia, Russia, and Iraq are all trading at above $30. But the most expensive crude in the world is likely selling for far more than that. Earlier this year, Australian company Santos sold a 550,000-barrel cargo of the Pyrenees crude grade for loading in March, at a premium of over US$30 over the price of Dated Brent. At the time, that would have been a cost of around $100 per barrel for the prized Pyrenees oil. In today’s environment, that same premium would mean Pyrenees oil bring sold at upwards of $56. Unfortunately, due to a lack of transparency in markets, there currently is no public information on those oil sales. As for the cheapest oil on the market at the moment, Wyoming General Sour would certainly be one of them, selling at $2.75 on Friday.

Just like crude oil, the price of gasoline can fluctuate wildly depending on where you are fuelling up and the different tax policy of the country or state you are in. The current price of NYMEX traded gasoline futures is $0.61 per gallon, which is probably a lot less than how much you paid when you last filled up your gasoline tank. In fact, if you were to try and fill up a tank in Hawaii today you would find yourself paying $3.306 per gallon. If you were in Hong Kong, however, you could spend upwards of $8.48 per gallon at a gas station. And even those numbers don’t tell the full story, because the true price of gasoline anywhere in the world is relative to your spending power. The most expensive gasoline in the world when taking that into account is India, where an average citizen could spend more than 80 percent of their daily wage on one gallon of gas. In Venezuela, by comparison, a gallon of gasoline has been recorded to cost 0.95 percent of the average daily wage – although with the country currently suffering through an intense economic crisis at the moment that figure should be taken with a grain of salt. The U.S. is two places below Venezuela on that list, with a gallon costing 1.64 percent of the average daily wage.

So next time you see prices quoted for either gasoline or crude oil, remember that the only thing it really represents is the general trend in the global cost of those products. The real price at any given location or time could vary significantly.

By Josh Owens for Oilprice.com

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