[energycity]

This could be a really easy question to answer! Do all countries pay the same for oil?

In the business I work in we advertise prices for our goods and services but in practice hardly any two of our customers pay the same price (most don’t realise this). It is complicated but (to keep it simple) there are discounts and special deals plus varying prices depending on how the services are supplied and how they are paid for.

Is buying oil simpler?

[pup55]

There is a market price, and a negotiated price.

If you want to buy oil on the market, no problemo: You know the specifications, and you know the price.

However, you can make a deal with the producing companies or nations to buy oil on a contract basis off the market. It may have slightly different specifications than the publicly traded grades, or maybe not. Maybe you just want to set yourself up with a secure supply chain, so you can run your factory and not worry about trading crude all the time. It benefits the producer to have a secure customer base too. You can hire employees, build infrastructure to do the business, and not worry about a lower cost supplier undercutting you, like they did in the 90's.

I think China has one of these deals working with Iran and Venezuela right now.

This stuff gets traded all over, for whatever negotiated price, and we only see the benchmark grades in the paper every day.

[cube]

I'd also like to add the world produces about 85 mbpd (million barrels per day). However most of the world's oil does not get traded on the open market, but instead is consumed internally. The USA and Indonesia are good examples. Even countries that are known as major exporters can also consume quite a bit of their own oil. For example Iran produces 4 mbpd but only exports 2.5 of it.

Oil consumed internally is bought and sold for in whatever the nation's local currency is, while internationally traded oil is in US dollars. Oil sold on the open market is "for the most part" sold at the same price to everybody unless there's some "special" arrangement as pup55 mentioned earlier. However to further complicate things some governments subsidize the cost of oil to appease their population. For example the retail cost of gasoline is less than 50 cents per gallon in Iran. In a way it's kind of like their version of a welfare system.