The price of oil or petroleum is usually quoted in barrels. A barrel is an imaginary quantity of 159 liters of any liquid. A barrel is a cylindrical container mainly used to store liquids. Barrel used to be a set measure during the olden times. It ranged from a 32 gallon capacity to a 36 gallon capacity and was mainly made of wood, aluminum, stainless steel and plastic.

Oil price per barrel is dependant on the oil's:

1. Grade - This is determined by its specific gravity (API) and its sulphur content
2. Location

It is common knowledge that oil is not available for trade across the counter. There are specific exchanges that determine the oil price per barrel and also facilitate the trade. The EIA or the Energy Information Administration uses the imported refinery acquisition cost to determine the oil price per barrel. This basically is the weighted average of all the oil imported into the US.

With the help of this data, the world oil price is arrived at. The demand and supply of oil has always been the quest of many economies and the affordability of oil can actually determine the health of an economy. The International Energy Agency states that higher oil prices have a negative impact on the economy of a country.

Oil price per barrel over the years has been subjected to significant fluctuations. The seven sisters or the cartel called OPEC was created to regulate these prices. They held fort for a considerable period of time but did not have a significant impact.

In July 2008 the oil prices touched an all time high of $145. Since then there has been a significant decrease. International oil price per barrel rose from $28 per barrel in 2003 to $147 per barrel in 2008. It is currently priced around $75 per barrel. This puts a major burden on government resources in countries where oil is primarily imported.

The oil price per barrel fluctuation is a result of an inelastic demand for oil. With a sharp drop or increase in price the demand does not change much. There is a lesser than significant impact on demand even as the supply of oil is fiercely controlled by a few. This supremacy over oil prices gives them a far greater control on the world economy as a whole making this an oligopolistic market.

The OPEC administered pricing system of oil failed in the year 1985. Since then the pricing system has been market linked. This is the main method of oil pricing today. Pricing markers that are widely used today are Brent, WTI and Dubai or Oman. The main fluctuations in oil price per barrel have been attributed to the speculation that takes place in the futures markets. This is however hugely debated.

An interim report by Interagency Task force revealed that the prices were largely a result of supply and demand forces. The task force is continuing further studies on commodity markets and a full report is yet to be released.