Industry, agribusiness, the military — and society in general — are dependent on petroleum, the most actively traded physical commodity in the world. When the United States restricts oil imports from the Middle East in 1959, Persian Gulf nations respond by forming the Organization of Petroleum Exporting Countries (OPEC) to regulate oil production and prices. Barrel prices are fixed to the U.S. Dollar, which depreciates with the fall of the Bretton Woods system. By 1973, OPEC is powerful enough to turn the tables, restricting production and exports to Western nations, resulting in a full-scale energy crisis.
The first product to trade successfully on the energy market is “No. 2” heating oil — introduced in 1978 amid extreme volatility. The success of the contract and the risk management opportunities it creates for energy producers and consumers lead to new contracts in crude oil (1983) and unleaded gasoline (1984). Today CME Group’s crude oil products help hedge the risks inherent in oil price fluctuations across multiple industries.