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API - Commission Publications Explains How Oil Market Works


Quiz Questions

1.Oil is the world economy’s most important source of energy and is, therefore, critical to economic growth. Its value is driven by demand for petroleum products, particularly in the transportation sector.
True
False
2. The principal activities, as illustrated in Figure 2, involved in moving crude oil from its source to the ultimate consumer. These activities occur within a global marketplace – an extensive physical infrastructure that connects buyers and sellers worldwide, all supported by an international financial market.
True
False
3.Figure ____________shows the relationship between the price of gasoline and the price of crude over the last 20 years
Figure7
Figure6
4.Futures markets bring a number of benefits to the global oil market. First, crude oil futures markets provide information about future expectations regarding supply and demand conditions. Second, these expectations are made transparent, i.e., known to the market, in the form of a series of futures prices for crude to be delivered at different dates in the future. Finally, crude oil producers, marketers, refiners, and others are able to use the financial contracts on the exchanges to manage risk, facilitated, in part, by the increasing participation of the number of investors without a commercial interest in the petroleum industry.
True
False
5.Refining a barrel of crude oil involves a series of complex processes.
True
False
6.Conceptually, the market for refined petroleum products is very similar to the crude oil market in that there is widespread buying, selling, and trading of products in both the physical market (e.g., spot market) and the futures market.
True
False
7.Figure ____________ represents the movement of refined products – gasoline, diesel, heating oil, kerosene, and jet fuel from the refinery to the end consumer.
Figure 11
Figure 10
8.Figure 9 represents_____________________.
World Spare Oil Production Capacity
Components of Retail Gasoline Prices
9.Figure 10 represents_________________.
Inflation-Adjusted Gross Margin in Refining, Distribution, and marketing of gasoline
Components of Retail Gasoline Prices
10.The prices faced by U.S. consumers for petroleum products are largely a consequence of the world economy’s stronger than anticipated growth, in the face of diminished excess capacity and increased supply uncertainty.
True
False