Crude oil prices are impacted by supply and demand in the marketplace. There are many things that cause supply and demand to go up or down. Here are the main factors that impact crude oil prices.
Oil will go up in price if there’s some factor that impacts the price. This could be global instability, a disruption in supply due to disasters, and so on. If there’s less of a demand for crude oil due to oversupply in the marketplace, the demand for crude oil will go down.
Oil and the Market
Oil is a commodity and it’s one of the most in demand products. We really can’t do anything economically without oil because we need it for transportation as well as in the production of many of the products we use each day. Crude oil is impacted in price by what the markets do and if there’s volatility in the markets oil will usually be impacted by this. In the summer for example, oil usually goes up in price because more people are traveling and there’s a higher demand for oil. The crude oil helps to determine the price of gasoline that we use in our vehicles. The price of crude oil impacts the price of the gasoline at the pump because use the oil to produce gas. The crude oil may make up as much as half the price of a gallon of gasoline.
Crude oil prices can fluctuate all year long because of the supply and the demand for gasoline. If gas is in high demand then crude oil prices will go up. If there’s less demand for gasoline then the price of the crude oil will go down. Crude oil prices are directly tied to the cost of gasoline in the market.
The production, distribution, transmission, and the price of the actual crud oil all factor into the costs of crude oil and the fluctuation of prices. If there’s a major refinery fire for example, and that refinery goes offline, the price of crude oil may go up for a short time if that refinery is a major producer. Once crude oil is refined and distributed the retailer that sells the gas or other oil products will set the price for those products and this is largely determine by the market. The retailer must be able to cover their own costs. At the pump many gas stations will compete with prices to get your business. If there’s a problem in the crude oil supply chain this is reflected at the pump when you go to buy your gasoline.
The cost of crude oil can be impacted by government regulations that are in place to clean up the air. There’s a need for cleaner burning gasoline and many states must meet these regulations. Which can impact crude oil prices. Different regions need specific formulations of gasoline which can drive up the costs of producing that fuel to meet the regulations for that fuel in one specific area. Taxes can also play a role in the price of crude oil too. Permits for building in the US are stagnant and no new refineries have been built since the 1970s. This means the US imports its gasoline which further drives up prices of crude oil.
Disasters/ World Problems
Anything that disrupts the crude oil supply chain can impact prices. For example, a hurricane in the Gulf of Mexico may wipe out the production capability of several oil rigs for several weeks or even months. This can impact the prices of crude oil. A lot of oil comes from the Middle East and instability yin an oil producing country can cause the prices to fluctuate. If the crisis in a country is severe then the markets price of crude oil crude skyrocket if it’s deemed that the supply is going to be interrupted because of the crisis.
Crude oil fluctuates in price all the time. There’s no telling what is going to drive the price up or bring it back down. The volatility in the price of crude oil is something we just have to live with.