Oil Prices in 2050

Crude oil is one of the world’s most actively traded commodities. Crude oil price measures the spot price of various barrels of oil, most commonly governed by the benchmarks. There are three major benchmarks mainly the WTI (West Texas Intermediate), Brent Blend and Dubai. The purpose of Benchmarks is to facilitate trading of crude oil in a market where there are almost 161 different varieties of crude oils (Energy Information Administration 2006a). Besides these markets, the OPEC (Organisation of Petroleum Exporting Countries) and the NYMEX (New York Mercantile Exchange) prices are quoted too. The price of crude oil as quoted in news generally refers to the spot price of either WTI/Light Crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at Cushing, Oklahoma (Energy Information Administration 2006a). The OPEC basket price is an average of the prices of oil from its member countries. OPEC prices are generally lower than the other benchmarks since the crude has high sulphur content. The role of OPEC been further discussed in the report. The NYMEX futures price represents the market determined value of a futures contract to buy or sell 1000 barrels of a particular benchmark at a specific time (Amadeo 2006).

For the purpose of defining the price of crude oil in 2030 I have selected WTI. The WTI is of a very high quality which makes it excellent for refining gasoline. It falls under the category of light crude oil since its API (American Petroleum Institute) gravity is greater than 10. The WTI is mostly refined in the US, with some more refined in the Gulf coast region. The WTI is generally priced at about $5-$6 per barrel premium to the OPEC price and about $1-$2 greater than the Brent (Amadeo 2006).

Crude oil prices have huge impacts on the economy and the individual. Oil is the major bloodline of any economy. Oil is not just about transport but it affects every facet of our technology dependent civilization. According to the EIA, 96% of transportation, 43% of industrial product and 21% of residential and commercial demands rely on oil (Energy Information Administration 2006a). The 21st century civilization is built on oil and an ever expanding supply of energy is vital to ensure continued economic growth. The figure below shows that the demand for oil has continued to increase since 1965 irrespective of the price. This trend is expected to continue over the next few years inspite of the fact that renewable energy usage in on the rise and policies such as the Waxman-Markey Bill are being introduced in the US parliament. Keeping the global energy demand