July 2016, Vol. 243, No. 7

Features

What Lies Ahead for Oil Prices

Oil prices are measured in 42-gallon barrels. The history of this tradition dates back to 1866, soon after Edwin Drake drilled the first oil well in the United States in Titusville, PA in 1859. In 1866, a group of independent oil producers met in Titusville and decided that the 42-gallon barrel was the best way to transport oil. At that time, barges floated barrels of oil down the Allegheny River to Pittsburgh on the way to be refined into kerosene. The adoption of this standard for oil measurement stuck, and today oil is still measured in 42-gallon barrels. The most fundamental determinant of oil prices is supply and demand. When the demand for oil exceeds supply, oil prices tend to rise,

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