Oil

No commodity has shaken the economy as much as oil. It keeps lorries rolling, planes flying, factories running.

And its price does not follow a calm curve. It jumps, it collapses, sometimes within weeks.

In October nineteen seventy-three, the Yom Kippur War broke out. Arab producing countries decided to use oil as a weapon.

They cut deliveries to certain countries, and OPEC, the producers' cartel, raised its prices.

In three months, the price of a barrel was multiplied by four. From about three dollars, to about twelve.

In Europe, car-free Sundays were brought in. Prices soared everywhere, and the years of strong growth came to a sudden halt.

A lesson was learned: a country that imports all its oil depends on decisions made elsewhere.

But a very high price carries its own fall. People look for oil elsewhere, save energy, change engines.

In nineteen eighty-six, Saudi Arabia opened the taps to win back market share.

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That was the counter-shock. The barrel went from around thirty dollars to around ten. Divided by three.

This time, the producing countries suffered. Their budgets relied on expensive oil.

The strangest moment came on the twentieth of April two thousand twenty. The pandemic had emptied the roads and the skies.

Oil kept coming out of the wells, but nobody wanted it. Storage tanks were filling up.

That day, the American futures contract reached expiry. Those holding it had to take physical delivery of the barrels.

But there was no room left to store them. So sellers paid to get rid of them.

The price fell to minus thirty-seven dollars and sixty-three cents. A negative price, for the first time.

On a contract of one thousand barrels, you had to pay thirty-seven thousand six hundred and thirty dollars for someone to take it.

The lesson is brutal: a financial price also depends on very concrete things. A tank, a pipeline, a date.

Today, the central player is called OPEC plus. OPEC, widened to Russia and other producers, since late two thousand sixteen.

Together, they decide to produce more or less to weigh on the price. A wider cartel, but not always in agreement.

For your budget, oil is everywhere: in filling up the car, heating, the price of transport and goods.

Remember that there is no normal price for oil. It has been multiplied by four, divided by three, and even gone negative.