Oil has never been an ordinary commodity. Since its commercial discovery in the United States in 1859, and its rise from the late nineteenth century into the first half of the twentieth century as a foundation for industry, transport, and energy, its pricing has always reflected a mix of economics, politics, power, fear, scarcity, and abundance. Over time, oil pricing moved from company-imposed figures to systems based on benchmarks, contracts, and market references.

In the early years of the modern oil industry, from the beginning of the twentieth century until the 1950s, there were no spot markets or real-time pricing screens. During that period, oil companies set what was known as the “posted price,” mainly used for calculating taxes, royalties, and long-term agreements, before the establishment of OPEC in Baghdad in September 1960.

As oil became more important globally, this pricing system gradually weakened. Between the 1960s and the 1980s, pricing shifted toward benchmarks such as Brent, West Texas Intermediate (WTI), and Dubai/Oman. Crude oil began to be priced relative to these benchmarks, with premiums or discounts depending on quality, sulfur levels, density, delivery location, and other conditions. Futures trading also emerged, with WTI futures launched in March 1983 and Brent futures in June 1988.

The Gulf: Creating a Benchmark
When the Gulf region moved to the center of the global oil economy, it initially operated under concession systems and official prices set by foreign companies. However, as production and exports from the region expanded, and as demand shifted toward Asia during the 1970s, 1980s, and 1990s, a pricing system better suited to the region became necessary.

As a result, Dubai and Oman crude emerged as key benchmarks for pricing a large share of Middle Eastern exports to Asia. Pricing in the region began to follow a benchmark-plus-differential model, where each crude type is priced relative to the benchmark with specific adjustments. Data from the U.S. Energy Information Administration shows that Dubai/Oman became one of the three main global benchmarks, even as Dubai crude production declined significantly over time.

This development highlighted that control over oil is not limited to owning reserves, but also includes managing pricing effectively through benchmarks, differentials, production capacity, and market positioning. The Gulf thus became a major center for oil price discovery. In this context, the Oman futures contract, launched with the Dubai Mercantile Exchange in June 2007, became the primary benchmark for the official selling prices of Oman and Dubai crude.

The UAE: Crude and Fuel
In the UAE, oil pricing can be understood through two main aspects: export crude and domestic fuel. On the export side, the country has long been integrated into the Gulf pricing system through grades such as Murban and Upper Zakum. As the market evolved, efforts were made to position Murban as a more transparent and independent benchmark.

Instead of simply linking its crude to external benchmarks, Abu Dhabi introduced a futures contract for Murban, providing clearer price discovery and improved hedging opportunities. ADNOC began shifting toward forward pricing in March 2020, with Murban futures officially trading from March 29, 2021, and pricing linked to these contracts starting June 2021.

On the domestic front, the UAE liberalized fuel prices by linking them to global markets through a monthly review system. Prices are determined based on international averages along with transportation, distribution, and operational costs. This reform came into effect on August 1, 2015, ending the system of fixed fuel prices.

When Prices Rise

Price corrections rarely depend on a single factor. They may result from increased supply, the return of disrupted production, reduced demand during economic slowdowns, or the use of strategic reserves. The International Energy Agency, established in 1974, has coordinated such responses multiple times, including major stock releases over the years.

Later events also show how sensitive oil prices are to geopolitical developments. When Iraq invaded Kuwait in August 1990, prices jumped sharply within days. Similarly, during the 2007–2008 cycle, oil reached a peak of $145 per barrel before dropping significantly by the end of 2008.

In today’s market, oil pricing is more complex than ever. It is shaped by production decisions, financial speculation, futures trading, regulatory policies, inventory levels, and overall market sentiment. Managing price stability often requires a combination of tools, including adjusting supply, using reserves, and monitoring global demand trends.

In conclusion, the evolution of oil pricing reflects a broader story of power, markets, and resource management. What began as a system controlled by major companies has transformed into a global structure based on benchmarks. In the Gulf, pricing became part of the region’s rise in the energy sector, while in the UAE, it evolved toward greater independence through Murban pricing alongside a structured domestic fuel system.