"Oil Markets And Prices" by Paul Horsnell and Robert Mabro

Posted by J

Oil Markets and Prices: The Brent Market and the Formation of World Oil Prices
1993 - by Paul Horsnell and Robert Mabro

http://www.amazon.com/Oil-Market-Prices-Paul-Horsnell/dp/0197300138/sr=11-1/qid=1163553492/ref=sr_11_1/002-0670725-0807254

Painful. Excruciatingly, agonizingly, boringly painful reading. Yet a masterpiece as well. This is not light reading, it's not a book someone merely curious about oil markets should even bother to pick up. It is, however, a now classic foundational book for anyone who seriously wants to understand how oil markets work.

Paul Horsnell (and doing a smaller amount of the writing, Robert Mabro) went to the core of how oil prices are formed. In 1993 oil market data was not nearly as widely available as it is today (and it's not exactly the most transparent market today either), and crunching numbers was a much more laborious task. But give credit to the authors, they dug into the raw data of the Brent market in particular and come out with a convincing academic review which explains just why the Brent (today the Brent-Forties-Oseberg or "BFO" market which Horsnell at least partially predicted back in 1993 it would evolve into) market is so important. Saudi Arabia, Iran, Russia, the United States, etc may produce far more oil, but the Brent stream, its infrastructure, its taxation structure, its geography, its liquidity, and its transparency are what was needed to produce a viable basis for global oil pricing as the era of OPEC administered prices (and before that the prices of the international oil companies) was shattered in the mid-80s.

A lot has changed in the market since 1993, and Paul has told me he's been asked to do an updated version of the book. His reply was "life is too short". Can't blame him, plenty more he can and does do in the markets. And in any case, for the professional who would (and should) pick up this book, it remains viable on its own and professional experience should then fill in the gap to the present. Of course, one has to stay awake long enough to read the book -- no offense to Paul, but there's a reason British academics aren't the stuff of action movies. That said, no pain, no gain!