ABSTRACT
In the United States, oil is the largest source of energy, providing 36% of overall energy consumption according to recent US Energy Information Administration statistics, of which 70% is for transportation. While oil is largely fungible, different grades of oil have different prices, depending on how easily they can be refined into premium products such as gasoline. Rockefeller focused on efficient production, and so was able to underprice competitors and buy out less efficient firms. The decline in tax revenue caused Venezuela, Iran, Iraq, Kuwait, and Saudi Arabia to form OPEC in 1960. Residential and commercial uses make up all but a fraction of the remaining 5% of petroleum consumption. These sectors use petroleum-based products including paints, detergent, fertilizers, and pesticides. Participants in the oil market must cope with its high price volatility. Producers and consumers use a variety of financial instruments to reduce risk. Participants hedge by purchasing derivative contracts.
