UNIVERSIDADE ESTADUAL DE CAMPINAS

Economia da energia II
Drivers of crude oil price
Crude oil is traded in a global marked. Prices of the many crude oil streams produced
globally tend to move closely together, although there are persistent differentials between
light-weight, low-sulfur grades and heavier, higher-sulfur crudes that are lower price/

Many types of crude oil are produced around the world. Variations in quality and location
result in price differentials, but because oil markets are integrated globally, prices tend to
move together.
Both crude oil and petroleum products prices can be affected by events that have the
potential to disrupt the flow of oil and products to market, including geopolitical and
weather-related developments. These type of events may lead to actual disruption or
create uncertainty about future supply or demand, which can lead to higher volatility in
prices. The volatility of oil prices is inherently tied to the low responsiveness or
`inelasticity` of both supply and demand to pries changes in the short run.
Much of the