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Figure 10A.1: Three phases of the world oil market.
As shown in Figure 10A.1, the development of our current globalized oil market can be broken down into a few different stages. The first phase was marked largely by intra-company transactions, with occasional inter-company "spot" sales. The second was defined by the emergence of OPEC and its attempts to influence an increasingly global oil trade for political ends. The third is defined by the commoditization of oil markets, with regional prices linked by inter-regional trade and the development of sophisticated financial instruments such as futures and option contracts, which we'll discuss in more detail below.