Top Three Things That Affect the Price of Oil

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In today’s world, oil is everywhere. From gasoline to the oil you put in your car, oil is everywhere, and it is an important part of society. Because so many people rely on oil from day to day to keep their lives running smoothly, we should be concerned about the price, and how events in the world can change that price – either making it rise greatly, which can affect the quantity of oil-based products people can afford, or dropping greatly, which can allow more people to purchase a greater amount of the product at hand. So, we all know that oil prices rise and fall, sometimes drastically.

But, how does this happen exactly? What is the factor that determines if oil prices will rise or fall, and if so, how much? Also, how does the fluctuation in prices affect oil industry jobs, such as Apache Corporation careers? Below we will look at the top five reasons that oil prices will rise, or fall.

China and Its Economy

China, which happens to be the second largest consumer of oil in the entire world, happens to have a large impact on the prices of oil. Because China burns so much oil on a daily basis, and according to the EIA, is estimated to use 3 million more barrels of oil in 2020 than it will in 2015, we can expect that the demand of oil will rise.
According to basic economics, when the demand for a product rises, and the supply is either diminished or stays the same, the price of the product will increase depending on the severity of the increase in demand. So, as long as China is burning more and more oil, the price will continue to go up unless the supply is replenished. In that case, oil prices would lower.

American Shale Extraction

Shale oil is a very important factor when it comes to oil and the price of oil. In 2014, the United States was producing around 9 million barrels a day, which drastically changed oil prices. Because they were overproducing, it will be hard to match that amount this coming year, which will in fact have an effect on oil prices, probably not for the better.

Supply and Demand

Supply and demand play an important role in any economic situation – oil included. When the price of oil is particularly low, people tend to buy more of the product. But, when people buy more and more of the product simply because the price of it is low, this can trigger a rise in demand, as well as a diminishing supply – both of which are factors that raise prices.

As you can see, there are a few factors that can drastically affect the price of oil, allowing for it to rise or to fall. Oil prices will continue to fluctuate through good times and bad times, but education on why the price of oil changes so drastically can bring you to a better understanding when it comes to supply, demand, and the oil industry.