Question

Which of the following explains why oil is a fungible product?"

"After the oil is retrieved, it is combined with oil from other places to be processed"
"Oil is brought from the earth under the same conditions all around the world,"
"Before oil is taken from the ground it is checked that it meets the standard quality"
"Once oil is made into gasoline, it is combined with other gasoline products."

Answer 1

Oil is considered a fungible product because it is interchangeable and can be combined with other oils during processing to meet industry specifications, creating a uniform commodity market.

Step-by-step explanation:

Oil is a fungible product because it is largely interchangeable with oil from other locations, allowing different batches of crude oil to be combined during processing. This fungibility means that once petroleum is extracted and processed, it becomes difficult to distinguish between oil from various sources, which is why oil trading occurs based on standard quality measures rather than from specific locations. Moreover, the various hydrocarbon chains present in crude oil are separated and treated to remove impurities, blending them into refined products like gasoline that meet set industry specifications, creating a uniform commodity market for oil products.