Posted oil price

The posted price of oil was the price that oil companies offered to purchase oil from oil-producing governments. This price was set by the oil companies and used to calculate the share of oil revenues that oil producing countries would receive.[1] Between 1957 and 1972, the posted price was greater than the market price of crude oil. Between 1961 and 1970 the market price hovered between $1.30 and $1.50 per barrel, while the posted price was a constant $1.80.[2]

Origins

Before Standard Oil was broken up by the United States Supreme Court in 1911, they used to "post" the price they were willing to pay for crude oil.[2] Until 1895, crude oil was sold on the exchange at Oil City, Pennsylvania, but in January 1935 the Seep Purchasing Company, which purchased 80% of Pennsylvania and Ohio's crude oil production for Standard Oil, posted a notice that the price of oil would "be as high as the market of the world will justify, but will not necessarily be the price bill on the exchange for certificate oil".[3]

The system continued after 1911 where large buyers would post a fixed buying price.[2] Historically, the posted price in the Middle East, or Venezuela was calculated based on the CIF New York price, which was itself based on the FOB Gulf of Mexico price. In other words, the posted price in New York was the FOB Gulf of Mexico price plus the cost of freight. Thus, if the posted price per barrel of crude oil was $3.16 in New York, after deducting the freight between New York and Kuwait ($1.19) and the US tax on oil ($0.11 per barrel), the posted price in Kuwait would be $1.87 per barrel.[4]

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