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Ways of looking at the oil price
After reaching a record high of $147.27 a barrel on July 11 last year, benchmark oil futures fell in December to a low of $32.40. They have since recovered to around $46 a barrel.
The Organization of the Petroleum Exporting Countries has not officially set a price it would like for its oil, but several ministers have said they need oil to be around $70 a barrel to support investment in new production.
Saudi King Abdullah said late last year $75 a barrel was a fair price for crude.
Saudi Arabian Oil Minister Ali al-Naimi said the level was fair because it was the cost for the marginal producer.
The following list explains the marginal cost and various other ways of looking at the oil price.
MARGINAL COST
The marginal cost is how much producers have to pay to extract more difficult oil, such as from the oil sands in Canada.
In line with the Saudi assessment of the marginal cost, Iran's OPEC governor Mohammad Ali Khatibi said some high-cost oil projects cost $70-$80 a barrel and if the price of oil continued to fall, investors would withdraw from them.
Many projects have already been postponed.
London-based analysts Bernstein also put the marginal cost at around $75-$80 a barrel for oil.
Increasingly, the cost of producing biofuels and nuclear energy has also been taken into consideration.
A study by the Nuclear Energy Agency and the International Energy Agency published in 2005 found nuclear energy was competitive when oil cost $40-$45 a barrel.
Since then oil prices and electricity costs have risen strongly and analysts estimated nuclear power was competitive when oil was at $70 a barrel.
OPERATING COST
The cost of operating fields once they are already onstream has been estimated to be around $50 a barrel.
Goldman Sachs in a report dated October 13 said the oil market could fall to as low as $50, which it believed was "the industry's cash cost and shut in level."
BUDGET ASSUMPTIONS
Oil-producing nations have historically assumed very conservative prices for a barrel of oil when setting budgets, allowing for some slack in their spending should prices fall.
The price of oil averaged nearly $100 last year and has averaged around $40 so far this year.
Data from Washington-based PFC Energy earlier this year showed Saudi Arabia needing oil prices to average $51 a barrel to break even, compared with $43 a barrel in 2008.
Analysts have said Saudi's budget assumption last year was $49 compared with $43 for 2009.
OIL COMPANY ASSUMPTIONS
Like oil-producing countries, international oil companies also make price assumptions that underpin their production sharing contracts with governments around the world and are used when assessing projects.
Total has said it based its projects on oil at $80 a barrel. BP's oil price assumption is between $60 and $90 a barrel.
FAIR VALUE
Fair value is a notional price taking into account only supply and demand, cutting out any speculative element.
It ignores factors such as the danger of conflict in oil-producing nations, currency effects and fund flows in and out of oil.
Estimates of what is the fair value of oil abound, but some players have said a fair price would be closer to $75 a barrel.
OPEC ministers in the past repeatedly said prices were inflated by speculation and that the price slide from last July's record in part reflected the departure of speculators.
INFLATION-ADJUSTED
In inflation-adjusted terms, last July's record price was well above the previous record high of $105.95 set in April 1980, after the Iranian Revolution in 1979.
That level was first breached in March 2008, according to the International Energy Agency (IEA). It bases its calculation on monthly prompt U.S. crude and U.S. consumer price data as U.S. futures trade did not exist in 1980.
BENCHMARK
The price of U.S. light sweet crude is a benchmark used for pricing other crudes. North Sea Brent futures are the other main international marker.
The most expensive crudes in the world, notably Nigeria's Pennington or Malaysian Tapis, command a strong premium to the benchmarks as they have low sulphur content, making them easy to refine to produce high yields of gasoline and other light fuels.
At the other end of the scale, heavy Iranian crudes Soroush and Norouz are sold at steep discounts to Brent crude.
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