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The barrel of oil equivalent (BOE) is a unit of energy used mainly for comparing different forms of fuel reserves. It is defined as the energy released by burning one barrel of crude oil. There are associated units of energy such as the kilo barrel and the billion barrel equivalents, which are used for larger scale issues.
One barrel of oil equivalent is the energy released through the burning of one barrel of oil. This is defined as 42 gallons (about 159 liters) of oil. Exactly how much energy this works out as in reality is unpredictable because oil comes in different grades, which produce fuels at different rates. To deal with this problem, most organizations use a standard measurement of energy for the barrel of oil equivalent. For example, the United States Internal Revenue Service (IRS) defines it as 5.8 million British thermal units (BTU). This is a separate measure of energy that refers to the energy needed to heat one pound of water by one degree Fahrenheit. As all pure water is identical, this is a consistent unit.
There are several other ways to express the BOE. For example, one BOE is the equivalent energy of around 1.7 megawatt hours in electricity. It is also equivalent to the energy from 5,800 cubic feet of natural gas.
One of the main uses of the barrel of oil equivalent is in financial statements by fuel companies. This is because it can be used to express amounts of both oil and gas. A company that has both oil and gas reserves can therefore give a single figure for its entire fuel reserves.
The barrel of oil equivalent is not useful in all circumstances. For example, it does not provide sufficient information for buyers and sellers of crude oil. This is because various types of oil are of different quality. Instead of BOE, the oil industry used crude oil benchmarks, which organize different types of oil into categories of similar variants.
Similarly, the Organization of Petroleum Exporting Countries (OPEC), an alliance of oil producing countries, does not keep track of prices by referring to the barrel of oil equivalent. Instead, it uses a "basket" of oils to produce an average price of 11 leading blends of oil. It is this basket price that OPEC seeks to control by increasing or decreasing production of oil and thus supply.