A Global CommodityA host of factors, many of them uncertain, affect the price of crude oil and the products made from it.
The roller coaster rise and fall in gasoline and diesel prices over the last few years tracks changes in the cost of crude oil. Those changes are determined in the global crude oil market by the worldwide demand for and supply of crude oil. Weak economic conditions in the U.S. and around the world in 2008 and into 2009 led to less demand, which helped push prices down. With the worldwide economic recovery under way, demand is on the rise again but unrest in the Mideast and North Africa has put supplies at risk. This combination of rising demand and reduced supply helped to push prices higher.
Crude oil prices are set globally through the daily interactions of thousands of buyers and sellers in both physical and futures markets, and reflect participants’ knowledge and expectations of demand and supply. In addition to economic growth and geopolitical risks, other factors, including weather events, inventories, exchange rates, investments, spare capacity, OPEC production decisions and non-OPEC supply growth all figure into the price of crude oil.