There's no such thing as one price for oil.
The price of oil is rarely out of the headlines. But anyone with an interest in the industry will tell you that there's no such thing as "the oil price." Instead there are many different types of oil which are all graded and priced according to their viscosity and sulphur content.Since oil must be physically delivered to customers, occasionally local supply gluts, bottlenecks and transportation problems will cause the price of oil in one part of the world to get out of line with prices elsewhere. This can have some strange effects upon global markets and the wider economy when it happens in America, as we're currently seeing.
Texas, meet Oklahoma
The most influential oil price is West Texas Intermediate (WTI), the benchmark for American oil. Normally WTI trades at a similar price to North Sea Brent crude, but a large gap has recently opened up. As I write this, whilst Brent is going for almost $123 a barrel, WTI sells for just over $107.WTI must be delivered to the small city of Cushing, Oklahoma (pop. 8,371 at the latest census). Whilst Cushing has limited storage facilities this ordinarily doesn't have any effect on the price of WTI. However, thanks to the recent opening of new pipeline, a veritable glut of Canadian oil is piling up there causing a big gap to open up between the price of WTI and comparable oils.