Index and Glossary

The secret 1928 pact between Standard Oil of New Jersey, Shell and Anglo-Persian to freeze market shares and stop competing on price, the first attempt to cartelize world oil.

A refinery unit that combines light olefins with isobutane to make alkylate, a high-octane, low-volatility gasoline blendstock.

An inverted density scale for crude. Higher numbers mean lighter oil; water sits at 10 degrees and most traded crudes fall between 20 and 45.

The OAPEC export ban imposed on the US and others after the October 1973 war, which quadrupled posted prices and ended the era of cheap oil.

Saudi Arabia's national oil company and the largest producer in the world, fully nationalized by 1980 and partially listed in 2019.

Hydrocarbons built on the benzene ring. They raise gasoline octane and feed most of the plastics industry, but benzene itself is a regulated carcinogen.

The heaviest residue left at the bottom of the barrel, used mainly for road paving and roofing.

The standards body whose test methods define most of the fuel specifications refiners and traders write into contracts.

A forward curve where near-dated futures trade above later ones, normally a signal that physical supply is tight now.

A weekly tally of drilling rigs working in the US, the oldest real-time proxy for upstream activity.

42 US gallons. The size was fixed in the 1870s Pennsylvania fields, where a 40-gallon barrel plus two gallons for leakage became the trade convention.

The handful of grades, chiefly Brent, WTI and Dubai, that most other crudes are priced at a differential to.

A diesel substitute made by reacting vegetable oil or animal fat with methanol. Distinct from renewable diesel, which is hydrotreated and chemically identical to the petroleum product.

Extra-heavy crude too viscous to flow at reservoir conditions. It is mined or steamed out of sand deposits and diluted before it can be pipelined.

The variant of Black-Scholes used to price options on futures, the standard model on every energy options desk.

Combining refinery streams, butane and ethanol to hit the octane, volatility and sulfur specs of each season and region at the lowest cost.

The North Sea benchmark that prices roughly two thirds of internationally traded crude. Now a basket of several grades rather than one field.

Marine fuel burned by ocean-going ships, historically high-sulfur residual oil and capped at 0.5% sulfur since 2020 unless the vessel has a scrubber.

Corporate Average Fuel Economy, the US fleet-average mpg rule administered by NHTSA since 1975 and written in model years rather than calendar years.

The price difference between two delivery months of the same futures contract, the cleanest way to express a view on storage economics.

The right, without the obligation, to buy at a fixed price. The instrument a consumer buys to cap its cost.

A system that fixes the total quantity of emissions allowed and lets participants buy and sell the right to emit within that total, so the carbon price is discovered rather than set.

The agency running California's vehicle emission programme, the only state rules the Clean Air Act allows to be stricter than federal EPA standards.

An EU charge on imports equal to the carbon price they avoided by being produced outside the bloc, with its definitive period starting January 1, 2026.

Capturing CO2 at a point source and injecting it underground, subsidized in the US through the section 45Q tax credit.

The European Union Emissions Trading System, launched in 2005 and still the largest carbon cap-and-trade market in the world.

Steel pipe cemented into a drilled hole to hold the wall open and isolate the well from groundwater.

The workhorse conversion unit, which breaks heavy gasoil into gasoline and light olefins over a circulating powdered catalyst.

A measure of how readily diesel ignites under compression, the diesel counterpart to octane, which measures resistance to ignition.

As First Lord of the Admiralty he converted the Royal Navy from coal to oil in 1912, making oil supply a question of national strategy.

The 1963 US statute, transformed by the 1970 and 1990 amendments, that authorizes most federal regulation of fuels and vehicle emissions.

The temperature at which wax starts to crystallize out of diesel, the first step toward a fuel system gelling in cold weather.

Converting coal into synthetic fuels through gasification and Fischer-Tropsch synthesis, commercially significant only in South Africa.

Buying a put and selling a call so the premiums offset, fixing a price range at no upfront cost.

The work done after drilling to bring a well into production: perforating, fracturing and installing production tubing.

Very light hydrocarbon liquid that drops out of gas as it is produced. It trades below crude because a refinery can do little with it.

A forward curve where later futures trade above nearer ones, which pays for storage and signals surplus.

The margin between crude and the products made from it, and the basic measure of refining profitability.

The full laboratory workup of a crude, listing density, sulfur, distillation yields and contaminants, which tells a refiner what that barrel is worth to it.

The Oklahoma tank farm where NYMEX WTI is delivered, and the bottleneck whose fill level drove crude below zero in April 2020.

Fitting the observed fall in a well's production to project its remaining output, the standard reserves technique.

Consumption lost permanently rather than deferred, because high prices pushed buyers into changing equipment or behaviour.

The middle distillate burned in compression-ignition engines, the fuel of freight, farming and construction worldwide.

Separating crude into cuts by boiling point. The atmospheric tower takes the lighter material, and the vacuum tower works the residue at reduced pressure to avoid cracking it.

Drilled the first commercial US oil well at Titusville, Pennsylvania in 1859, the conventional starting date of the industry.

Cutting a wellbore with a rotating bit. Steering it sideways through a thin producing layer is what made shale economic.

The medium sour Gulf benchmark against which most crude sold into Asia is priced.

The statistical arm of the US Department of Energy, and the source of most free authoritative oil data.

The Wednesday release of US crude and product inventories, the most market-moving scheduled data point in oil.

Vehicles driven by a battery and motor rather than combustion, and the main mechanism by which gasoline demand is expected to peak.

Energy delivered divided by energy spent getting it. Conventional oil started near 100 to 1 and has fallen steadily since.

The shift of the energy system away from fossil fuels, proceeding at very different speeds in power generation, transport and industry.

Third-stage recovery using CO2, chemicals or steam to move oil that pressure support alone will not.

Allocating capital on environmental, social and governance criteria, which raised the cost of capital for oil producers through the late 2010s.

The lightest natural gas liquid, used almost entirely as steam cracker feedstock to make ethylene.

Grain alcohol blended into gasoline, locked at roughly 10% of the US pool by the Renewable Fuel Standard.

The highest-volume petrochemical building block, the starting point for polyethylene and much of the plastics industry.

Imaging subsurface structure with reflected sound waves to find traps worth drilling.

The largest US oil major, formed in 1999 out of the two biggest pieces of the broken-up Standard Oil.

The lowest temperature at which a fuel gives off enough vapour to ignite, the property that governs safe handling and storage.

Holding crude or products on anchored tankers, economic only when contango pays more than the vessel costs.

Selling crude at a benchmark price plus a producer-set differential instead of negotiating each cargo, the system Saudi Arabia adopted in the mid-1980s.

The set of futures prices for successive delivery months, which shows what the market will pay to have a barrel later rather than now.

Pumping water, sand and chemicals into rock at pressure to open flow paths, the technique that unlocked shale.

The heavy leftover at the bottom of the barrel, burned in ship engines and power stations and worth less than the crude it came from.

Standardized exchange-traded contracts with fixed quality, quantity and delivery point, margined daily so counterparty risk sits with the clearing house.

The light distillate blend burned in spark-ignition engines, the single largest product cut in the US barrel.

Optimizing the mix of refinery streams to meet seasonal and regional specs, where a fraction of an octane number is worth real money at scale.

How much warming a tonne of a gas causes relative to a tonne of CO2 over a stated number of years. The horizon has to be named, because gases leave the atmosphere at very different rates.

The sensitivities of an option's value to the underlying price, time, volatility and interest rates, named delta, theta, vega and rho.

Distillate burned for space heating, chemically close to diesel and the original basis of the NYMEX distillate contract.

Crude of low API gravity, generally below about 22 degrees, which yields more residue and needs more conversion capacity to process.

Taking an offsetting financial position so a change in the physical price does not change the economic outcome.

The Louisiana pipeline junction that is the delivery point for US natural gas futures and the reference for North American gas pricing.

Turning the wellbore to run along a thin producing layer for thousands of feet, multiplying the rock a single well contacts.

The June to November Atlantic period that threatens Gulf of Mexico production and Gulf Coast refining, and the reason for a seasonal risk premium.

Cracking heavy feed in the presence of hydrogen, which yields cleaner middle distillates than catalytic cracking and removes sulfur at the same time.

Devices that generate electricity from hydrogen and air. Their realistic role is in industry and heavy transport rather than passenger cars.

The Paris-based agency founded after the 1973 embargo to coordinate consumer-country stockpiles, now also a leading forecaster.

The International Maritime Organization rule that cut the sulfur limit on marine fuel from 3.5% to 0.5% worldwide on January 1, 2020.

The volatility figure that makes a pricing model return an option's traded price, so it is the market's own estimate of future movement.

The ICC's standard trade terms, FOB, CFR, CIF and the rest, which allocate cost and risk between buyer and seller and say nothing about title.

Producers without integrated refining and marketing, the group that drove the US shale build-out.

A publicly listed, investor-owned oil company operating across borders, as distinct from a state-owned national oil company.

The kerosene-range distillate burned in aviation turbines, specified far more tightly than diesel because an engine cannot be restarted on the ground.

The lamp fuel that created the oil industry. Gasoline was a waste product until the motor car arrived.

Crude of high API gravity, which yields more gasoline and distillate directly and therefore commands a premium.

Natural gas chilled to about minus 162 Celsius so it occupies roughly one six-hundredth of its gaseous volume and can be shipped.

Propane and butane held liquid under modest pressure, used for heating, cooking and petrochemical feed.

Base oils plus additives that keep moving metal surfaces apart. A small volume of the barrel carrying an outsized share of its margin.

The handful of large integrated firms operating from wellhead to forecourt, descended from the Seven Sisters.

Gas leaked, vented or incompletely flared from oil and gas operations. Methane survives about twelve years in the atmosphere, which is why its warming is always quoted over a stated horizon.

Methane trapped in ice-like cages in permafrost and deep marine sediment. An enormous resource with no commercial production.

The Texas independent who spent seventeen years combining fracturing with horizontal drilling in the Barnett until shale gas finally worked.

The design year a vehicle is sold under, which runs ahead of the calendar. A model year 2031 car reaches showrooms during 2030, so a rule dated 2031 constrains decisions taken years earlier.

The US limits on six criteria pollutants. Counties that miss them face stricter permitting, reformulated fuel requirements and vehicle inspection programmes.

A light distillate used both as petrochemical cracker feed and as a gasoline blendstock, and the swing between those two uses sets its price.

Saturated ring hydrocarbons, the preferred feed for catalytic reforming because they convert readily into aromatics.

A state-owned producer. NOCs control the large majority of world reserves.

State seizure of foreign-owned oil assets, the wave through the 1960s and 1970s that created most of today's NOCs and ended the concession era.

Ethane, propane, butanes and natural gasoline separated out of produced gas, priced against both oil and gas depending on the molecule.

On April 20, 2020 the expiring WTI contract settled at minus $37.63, because Cushing storage was effectively full and longs had nowhere to take delivery.

A score of how much conversion capacity a refinery has relative to its distillation, and therefore how cheap a crude it can profitably run.

Valuing a crude by working backward from what its products fetch, less refining and freight costs.

The exchange that launched the WTI crude contract in 1983 and made a transparent forward oil price possible.

A gasoline's resistance to knocking under compression, which sets the compression ratio an engine can safely run.

The monthly differential a national oil company sets against a benchmark for each grade and destination, a policy signal as much as a price.

The US statute passed after the Exxon Valdez that imposed strict liability on spillers, created the Oil Spill Liability Trust Fund and phased out single-hull tankers in US waters.

Alberta's bitumen deposits, mined near surface and steamed out at depth, and among the highest-cost and highest-carbon barrels in the world.

Rock holding organic matter that never got hot enough to become oil. Distinct from shale oil, which is real crude trapped in tight rock.

Unsaturated hydrocarbons such as ethylene and propylene, reactive enough to serve as the base of the petrochemical industry.

Founded in Baghdad in 1960 by five producers reacting to unilateral cuts in posted prices, and dominant over price from 1973.

The 2016 arrangement extending OPEC coordination to Russia and other non-members, formed in response to the shale supply surge.

Contracts conveying the right without the obligation to transact at a set price, which is what makes their payoff asymmetric.

Straight and branched saturated chains, the largest class of hydrocarbons in most crudes.

The 2015 treaty that replaced Kyoto's binding targets with self-set national pledges revisited every five years.

The argument moved from a supply ceiling to a demand ceiling. The question is no longer whether the oil exists but whether anyone will buy it.

The West Texas and New Mexico basin that produces more oil than most OPEC members and drove US output to record levels.

Chemicals made from oil and gas feedstock, the demand segment expected to keep growing after transport fuel peaks.

A price reporting agency whose assessments settle a large share of physical oil contracts.

The cheapest way to move oil overland, and the reason regional price differentials appear wherever capacity is short.

Polymers made from petrochemical building blocks, accounting for roughly 4 to 6% of world oil demand as feedstock.

The price reporting agency, now part of S&P Global, whose Market on Close process produces the Dated Brent assessment.

The highest-volume plastic, made from ethylene and split into grades by density and branching.

The prices the majors unilaterally set for tax and royalty purposes before 1973. Cutting them in 1960 is what caused OPEC to be founded.

The lowest temperature at which an oil still flows, which decides whether it can be pumped in cold weather.

The NGL used for heating, cooking, crop drying and petrochemical feed, with strongly seasonal demand.

Volumes reasonably certain to be recoverable under existing economic and operating conditions, the only category the SEC permits in a 10-K.

The right, without the obligation, to sell at a fixed price. The instrument a producer buys to set a floor.

The share of the oil in place that a field will actually produce, typically about a third for conventional reservoirs and under a tenth for shale.

Scheduled shutdowns for maintenance and catalyst replacement, concentrated in spring and autumn, which tighten product supply while they run.

What a refiner earns per barrel after crude and operating costs, most often tracked through the crack spread.

Rearranging naphtha into aromatics over a platinum catalyst to raise octane, producing as a byproduct the hydrogen the rest of the refinery needs.

A gasoline's volatility, capped tighter in summer so evaporating fuel does not go on to form ground-level ozone.

The US mandate setting annual volumes of ethanol and advanced biofuel that must be blended, enforced through tradable RIN credits.

Proved, proved plus probable, and proved plus probable plus possible. The three carry very different confidence levels and different reporting rules.

What is left after distillation and conversion, sold as marine and utility fuel at a discount to crude.

Built Standard Oil into a refining and logistics monopoly holding roughly 90% of US capacity before the 1911 breakup.

The gain or loss from rolling a futures position forward, positive in backwardation and negative in contango, and often larger than the price move itself.

The Louisiana facility that shipped the first LNG export cargo from the lower 48 in February 2016.

Voids solution-mined out of salt domes, the cheapest large-scale hydrocarbon storage there is and the form the US SPR uses.

The only producer holding meaningful spare capacity, which is what lets it move the market by changing output rather than by announcement alone.

The recurring annual pattern in demand, refinery runs and inventories, driven by driving season, heating demand and turnaround schedules.

Sound-wave imaging of the subsurface. A 4D survey repeats a 3D one over time to watch fluids move as the field is produced.

The seven companies that controlled most of world oil outside North America and the Soviet bloc until the 1970s nationalizations.

Crude produced from low-permeability rock by horizontal drilling and fracturing, which turned the US into the largest producer in the world.

A furnace that separates metal from ore. Now one of the few remaining sources of airborne lead, since leaded gasoline was phased out.

Crude with high sulfur, generally above 0.5%, which needs more hydrotreating and therefore sells at a discount.

Output that can be brought on within about thirty days and sustained, the only real physical shock absorber the market has.

The January 1901 Texas gusher that produced more oil in a day than the rest of the world's wells combined, and moved the industry's centre to Texas.

Trade in cargoes for prompt delivery at a negotiated price, as opposed to term contracts or futures.

Rockefeller's combine, broken into 34 companies by the Supreme Court in 1911. Several of today's majors are its pieces.

Thermally breaking naphtha or ethane into olefins in the presence of steam, the first step of the petrochemical chain.

The US government crude stockpile held in Gulf Coast salt caverns, created after the 1973 embargo and drawn to multi-decade lows in the 2020s.

The share of sulfur in a crude or fuel, the single property most responsible for price differentials and the most tightly regulated in products.

A bilateral contract exchanging a floating price for a fixed one over a period, the standard hedging tool for corporate consumers.

Crude with low sulfur, easier to process into clean products and therefore priced at a premium to sour grades.

A measure of naphthenic acid content, which corrodes refinery metallurgy and forces high-TAN crudes to trade at a discount.

The size classes of crude carrier, named for the canals and terminals they can transit. A VLCC carries about 2 million barrels.

The state agency that controlled Texas output through prorationing from the 1930s to 1972, and the working model OPEC later followed.

A collar with a second, lower put sold against it, which cheapens the hedge and reopens the downside below that strike.

Oil held in low-permeability formations that will not flow without fracturing. The same thing traders call shale oil.

The Dutch virtual trading point that serves as Europe's gas benchmark, and the price that passed 300 euros per MWh in 2022.

Diesel at 15 ppm sulfur, mandatory on US roads since 2006. The tightening was driven less by sulfur emissions than by the need to keep modern after-treatment hardware alive.

Resources needing more than a conventional well to produce, chiefly shale, oil sands and extra-heavy crude.

The pressure a liquid's vapour exerts at a given temperature, which governs how a fuel is stored, shipped and specified by season.

Resistance to flow, and the property that decides whether a crude can be pipelined without dilution or heating.

Hydrocarbon vapours that react with NOx in sunlight to form ground-level ozone. Controlled through fuel volatility limits and vapour recovery at terminals and pumps.

How much a price moves. The input options are priced on, and the reason hedging costs what it does.

The West Texas gas hub where associated Permian gas has repeatedly traded below zero for want of pipeline capacity.

Injecting water to hold up reservoir pressure and sweep oil toward the producing wells, the most common secondary recovery method.

Solid paraffins removed from lube base stocks, sold on into candles, packaging and coatings.

The flat-rate freight schedule that tanker charters are quoted as a percentage of, which lets one number compare voyages of different lengths.

The light sweet US benchmark delivered at Cushing, Oklahoma, and the underlying of the most heavily traded oil futures contract in the world.

A collar structured so the premium received for the sold call exactly funds the purchased put, giving protection with no upfront cash.