Oil trading please read

i was having a light conversation with my sister yesterday when she started talking about oil prices, and i found out about something very interesting.

well i guess i have to briefly introduce my sister, as to assure you of where she got her data and accentuate the validity of her statements.
she works with petronas, in the oil business department. so she handles trading and things related to oil business (duh). in short, she knows how the prices are negotiated.

In essence, based on reality and not some crap made up by the government, this is how oil prices are determined.

To simplify it, the oil exporting countries usually gather to trade oil. they have headquarters in the USA,Japan, Saudi, etc etc. Each country is represented by a body which records and negotiates their trading going-ons. this body is called platts. in this trading session, each country offers their oil. lets take Malaysia, say our representative offers our oil, and the others will bid on it. and ofcourse, the oil will go to the highest bidder.

There are three prices of oil, the highest price, where it is the value of the highest bid, the minium, which is the lowest bid and lastly, the average which is the value in between max and min. so say initially the oil price is 100bucks perbarrel. Out of the blue, someone suddenly offers $200 bucks perbarrel for our oil. so the average will go up and the max price now will be $200. based on this shocking offer, all the other countries now believe that, there are buyers who are willing to pay that high price for oil. so they will now sell at $200 barrel. as you can see, it is merely based on speculation that people are willing to buy at a higher price. yes, only based on speculation even though there isn't exactly a need for the price to go up. everyone is selfish and wants to get the maximum amount of profit.

So thats how it works. the platts(the body) will record all transaction and will determine the current price of oil.

As you can see, from here, there are plenty of room for fraudulence, selfish propaganda and manipulation by those in power. how?Think about it. and if you're stuck, you can ask me anytime.

That's one part of it.
the grade of oil also plays another significant role.

the countries bid on a certain grade of oil. say grade A. Let's take the price of Grade A to be $200 per barrel. If Malaysia sells grade A oil and in return buys grade B which is a lower quality oil, the lower quality oil will be cheaper, maybe by $20. this makes sense cause it is of lower quality anyway. and say Saudi buys grade A++ which is of higher quality. they therefore have to pay say $50 more. This is how they trade.

Now that you know all this, i will write my next post on how the Malaysian government has robbed us all and manipulated facts to make them look ....Good.