Today’s oil market is truly global: Trade is no longer defined by bilateral arrangements between countries, and consumers on different sides of the world feel the effects of supply swings equally. There are more producers than ever contributing to a single global pool of oil, limiting the ability of large individual producers to manipulate the market.

oiltanker

The Omala oil tanker receives its payload from Iraq's Al Basrah Oil Terminal. (U.S. Navy/Wikimedia Commons)

Oil is fungible. There are varying grades of oil, but they are often sold internationally in reference to standard international benchmarks and can be blended together to compensate for differences in quality. This characteristic, combined with low transportation costs, means that a barrel of oil from the Middle East is now essentially the same as a barrel produced in South America or Africa. Moreover, because oil is blended after refining, a single barrel of oil could in fact be from multiple countries. 

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