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The cost of producing crude oil varies enormously from place to place. In some parts of the Middle East, where oilfields are large and easily accessible, the cost of extracting oil from the ground can be less than 10 cents a barrel.
Even with the costs of transportation and marketing, Middle East oil can be relatively cheap to deliver to major consuming countries because the cost of production is so low.
Major producers such as Saudi Arabia have traditionally been keen on relatively low oil prices, partly because this protects their market share by rendering new development of reserves elsewhere uneconomic.
However, new technology is bringing the cost of developing reserves down all the time.