Oil Price Benchmarks Are Missing One Thing: The Climate Cost

This briefing by RMI argues that current global oil price benchmarks fail to account for the varying greenhouse gas emissions intensities of different crude oils, creating perverse market incentives. The author proposes incorporating emissions data, specifically via the Oil Climate Index plus Gas (OCI+), into benchmark pricing to reflect the true climate cost of production and encourage operators to reduce emissions.

• Current oil price benchmarks are based on oil quality (density and sulfur), location, and timing, but they do not factor in the climate damages caused by the oil and gas industry, despite emissions footprints varying by a factor of two to five.
• There is a disconnect between the market price of oil and its embedded greenhouse gas intensity. For instance, Algeria's Sahara Blend commanded a high price in 2022 due to quality characteristics despite having high emissions intensity from methane leaks and flaring, while the Mars benchmark has lower emissions intensity despite being heavier and sourer.
• The lack of emissions-based pricing creates perverse incentives, particularly for heavy, sour oils from regions like Canada, California, and Venezuela. These oils require more energy-intensive extraction and refining processes and result in higher Scope 3 end-use emissions, yet they are primarily discounted based on quality rather than climate impact.
• Integrating the Oil Climate Index plus Gas (OCI+) into benchmark pricing would improve emissions reporting and market signals. For example, the Brent field could have been decommissioned a decade earlier if its emissions intensity—which rose to over six times the Brent basket average—had been reflected in its price.

APA

RMI (2023). Oil Price Benchmarks Are Missing One Thing: The Climate Cost. https://rmi.org/resources/oil-price-benchmarks-are-missing-one-thing-the-climate-cost/

Chicago

RMI. Oil Price Benchmarks Are Missing One Thing: The Climate Cost. 2023. https://rmi.org/resources/oil-price-benchmarks-are-missing-one-thing-the-climate-cost/.

Wikipedia

{{cite report |author=RMI |title=Oil Price Benchmarks Are Missing One Thing: The Climate Cost |date=1 May 2023 |url=https://rmi.org/resources/oil-price-benchmarks-are-missing-one-thing-the-climate-cost/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2023oil, author = {{RMI}}, title = {{Oil Price Benchmarks Are Missing One Thing: The Climate Cost}}, institution = {RMI}, year = {2023}, month = may, url = {https://rmi.org/resources/oil-price-benchmarks-are-missing-one-thing-the-climate-cost/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }