Over the course of the past week, I wondered what commodity I would write about next.  Then an explosion occurred, on Earth day the rig sank, and for the following week, we were cautiously informed of the worst disaster in the history of rigs unfolding on our Southern shores.  As I write, most of us cannot comprehend the girth of the crisis this will bring to the ecosystems of the area.  New Orleans residents may forget about hurricanes for awhile as their wildlife populations struggle for survival.  So this week’s commodity is oil, or black gold, to the traders and brokers that make it their livelihood. 

Oil is found naturally in the ground, the result of thousands of years of decomposition of organic material compressed.  When a well is located, it is tapped, and drained.  The “crude oil” may then be exported to a refinery overseas.  It is put through a process of “fractional distillation”, which separates the components of the oil as they are heated.  If you have ever driven through Houston to the main port area, you have seen these overgrown pieces of chemistry equipment, looking much like the silos and farms of the Northeast, yet vast and almost overwhelming in size and number. Different crude oils may separate into different liquids as they are refined.  Some of the more familiar ones are petrol, naptha, kerosene, heating oil, and diesel.  Heavier materials are like the more familiar oil for you vehicle, ship oil, and lubricating waxes.

Most of us have a general idea of our usage of oil.  It is the most common source of energy in the United States.  It keeps the lights going (for many of us) at night, keeps our vehicles running, our established commerce flowing; mail, groceries, retail goods, our boats catching fish, and it allows the production of some of our favorite items.  We may not realize how much of our current lifestyles are supported by oil.  When countries industrialize, attempting to reach similar standards of living to our own, their dependence on oil also increases rapidly.  If these countries are the same that formerly exported much of their fuel to us, rather than export, they may keep it for their own utilization, hence lowering global availability, and raising prices.

In 2009 the countries  producing the most oil were Russia, Saudi Arabia, the US, Iran, China, Mexico, Canada, UAE, EU, and Venezula.    Consuming countries have rather a different composition; the US, China, Japan, Russia, India, Germany, Brazil, Canada, and Saudi Arabia.  As imagainable, this discrepancy between production and consumption creates the trading arena.  If you are interested in trading oil you may do so through specific ETFs (exchange traded funds), or individual companies owning rigs and tankers.  It may behoove you to research other forms of energy as well, before rushing into play with black gold.  Just because it is ‘natural’, doesn’t mean it is good for you!