Why does oil remain king among energy sources?
Why are computers, phones, air conditioners and all kinds of other technology becoming increasingly better and more affordable, while bathroom renovations, education and healthcare – increasingly expensive? One important reason is competition. Producers from around the world compete for our money. When it comes to the bathroom, we usually choose between several local tradespeople, whose numbers have been declining recently.
The global market allows every improvement in technology, productivity and organisation – whether involving machinery, clothing, food or metals – to reach billions of buyers. It pits producers against one another, while transport and trade carry competition across borders. Thus, the possibility of charging high prices because of a local shortage is constantly subjected to pressure from the free market.
This is not a universal law of continuously falling prices. But it is a powerful mechanism for increasing affordability. In energy, its most complete expression is found in oil and refined oil products.
Oil’s advantage begins with physics – a great deal of energy in a relatively small volume, liquid under normal conditions, and convenient to store and transport. From there comes the economics – tankers, pipelines, storage tanks, refineries and traders connect producers and consumers in a common market. If the price somewhere rises sufficiently above the rest, an incentive emerges to redirect cargoes there, quickly equalising prices.
The figures show the result. In 2025, the average prices of Brent, Dubai and WTI crude were approximately $69, $68 and $65 per barrel, respectively. Three different blends, linked to different geographical regions, fit within a gap of approximately 6%. That is close to a single global price, although it is not absolutely identical at every port.
Of course, quality, transport, sanctions and infrastructure matter. In 2011, for example, the premium of Brent over WTI reached almost $30 per barrel because of transport restrictions in the United States. In April 2020, we even saw negative WTI prices, while in May 2026, futures prices and physical deliveries diverged by 40-50%. A global war is not necessary to break the connection – sometimes an insufficient pipeline or storage capacity is enough. The common market exists thanks to the possibility of physical delivery, not merely because of exchange screens. The end result, however, is impressive:
In the 21st century, oil remains the world’s most widely used energy source, while international trade in crude oil and petroleum products reaches a volume equivalent to around two-thirds of global consumption.
The global price of the commodity does not mean identical petrol or diesel at the pump. Excise duties, VAT, subsidies, specifications, refining capacity and local competition change the final price of fuels.
But does oil become cheaper over time?
Current nominal prices – an average of $108 per Brent barrel for October 2026 – appear relatively high. Adjusted for inflation, however - the first chart shows the price per barrel in dollars since 1990 - these prices are much lower ($42) than the peaks of 2008, 2011 and 2022 and more or less at the average level for the past 35 years. And the world is currently experiencing the greatest supply crisis in history!
Gold tells an even more impressive story. As of today, a barrel of oil costs less than 1 gram of gold. As can clearly be seen from the second chart, the price of oil measured in gold has fallen almost continuously, and despite the global energy crisis, oil remains exceptionally cheap today when measured in gold.
Coal also has substantial international trade – in 2024, it reached 1.54 billion tonnes, more than 90% of it transported by sea. Its global market, however, covers a much smaller share – around 18-20% of global consumption. The burden of transport and differences in calorific value, moisture and quality leave a large part of the coal economy regional and/or even local. Lignite is a typical example of a resource that is used only locally – it is practically impossible to transport, except in unique circumstances.
With natural gas, geography becomes much more expensive. The most efficient and affordable option involves transmission between neighbouring countries through pipelines and storage in specialised facilities. Global overseas trade, however, requires much more. Cheap American, Russian, Qatari or Australian gas cannot simply sail to Europe or East Asia. It requires liquefaction at minus 162 degrees, a specialised vessel and regasification facilities (third chart). Liquefaction itself uses approximately 7–15% of the gas supplied. Liquefied gas connects regions, but infrastructure and costs limit price equalisation. The end result is huge price differences – from 3-4 times to more than 10 times – which change over time depending on geopolitical shocks. The data for October 2026 (fourth chart) clearly shows how large these differences can be.
Electricity is the most extreme case. It depends on the available grid, transmission capacity, the time of delivery and, more recently – on the whims of the weather, which determines the output of renewable energy plants. A midday surplus does not automatically provide evening consumption. Negative wholesale prices at midday (sunshine) or during strong winds can coincide with extremely high prices within the same 24-hour period (in the evening and/or during calm conditions), or simultaneously in neighbouring countries. Full or empty reservoirs can lead to differences in national electricity prices of dozens of times. This shows how different the value of one megawatt-hour can be across time and space. In addition, electricity markets operate in such a way that the final price at any given moment is determined by the output of the most expensive plant in the mix. In the vast majority of cases in Europe, these are gas-fired power plants. By its very nature, electricity is a regional commodity. It cannot be traded efficiently over long distances, let alone across oceans. This effectively condemns it to extreme price volatility.
The huge differences in today’s electricity prices in Europe (fifth chart) – not only between countries, but also between regions within a single country – clearly demonstrate everything described above. Notice what is happening today in Sweden (an average price ranging from 6 to 390 euros/MWh) and Norway (an average price ranging from 9 to 249 euros/MWh) within a single country on a single day. If one looks at the 24-hour electricity price curve on a summer day in Germany or Bulgaria, one can see changes from minus 10 to more than 300 euros/MWh within a matter of hours, depending on changes in sunshine and wind speed. This is not something unique, but entirely normal for a product that practically has to be consumed at the moment it is produced.
Oil allows energy to be moved relatively easily both across oceans and through time. Thus, every consumer gains access to global supply, while the local producer is exposed to global competition. This does not make oil the cheapest choice for every use. Its coronation is due to the combination of energy density, storability, transportability and market connectivity. Technology increases supply, while the global market spreads the benefits.
Of course, one day electricity storage may become very cheap in enormous quantities, and its transmission may become wireless and unlimited, giving us a truly global market. Let’s hope so, but we probably won’t see it anytime soon...
In the meantime, oil remains king because a barrel can go wherever it is needed. And the ability to choose where to buy from at any given time is the strongest protection against high prices.