Crude truth behind numbers that govern our lives

I magine that your neighbourhood has been chosen as a benchmark for house prices. Sales are recorded and an index is constructed. Soon, investors begin to trade the index, anticipating its value as a way of managing exposure to property prices.

Trading increases and news begins to affect investor behaviour. A local school achieves high scores in an Ofsted inspection, investors rush to buy futures and the index rises. It surges again when the local authority cuts the council tax. Investors rush to buy and soon index futures become not just a local, but a national, benchmark. Trading volumes grow and the price becomes volatile, dipping sharply as reports emerge that a care home for juvenile offenders has opened in the neighbourhood, only to rise again when a TV programme describes your neighbourhood as


It sounds absurd, that a tiny market, buffeted by local news, should become a proxy for values across a nation, not to mention the world, but that is roughly what has happened in the global oil market. Consider the benchmark US crude blend, West Texas Intermediate. It is the foundation of the US Light Sweet Crude Oil contract, traded on the New York Mercantile Exchange. Nymex WTI is the most widely traded oil futures contract. Every 24 hours, the volume in barrels traded exceeds by three times the 85 million barrels of crude consumed daily round the world. The all-time