Question 1

The global oil market is one of the largest and most active commodity markets in the world. With an average daily consumption of approximately 90 million barrels, crude oil and its refined products are integral to the transportation and industrial sectors of every major world economy. Crude oil can be refined into many different types of end products, but 75% of all crude oil consumed in 2017 was in the form of gasoline, heating oil/diesel fuel, jet fuel or propane. Oil production and consumption are spread across the globe, but several key producers account for a large portion of world supply, while the large industrialized countries account for the lion's share of global consumption.

Different regions face substantially different costs for extracting oil. Many of the OPEC countries are endowed with large conventional oil reserves, in which large amounts of liquid oil are relatively easily accessible with standard drilling techniques. In contrast, countries such as Canada and the United States have likely discovered most major conventional resources and have since moved on to unconventional sources of supply, such as shale oil in the US and oil sands in Canada. Accessing conventional reserves is

relatively low-cost, as the technology to drill such wells is well-developed and the oil is relatively easy to extract from the ground. Unconventional oil, on the other hand, often involves technology- and labor-intensive extraction processes and is often significantly more costly.

Table 1 reports the production cost in different regions as well as the current capacity.

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