Oil and gas plays a key role in running our world, from powering homes and businesses to keeping the transportation infrastructure running. Our lives wouldn’t be the same without oil and gas.

Consumers can easily spot price fluctuations within the oil and gas industry, from filling up our tanks at the gas pump or sticker shock on our utility bills during the winter and summer months. These price changes may seem meaningless at times, however, several factors influence increases and decreases in oil and gas pricing. There is more to it than supply and demand.

If you are considering investing in crude oil, understanding the factors which affect oil and gas prices will give you a more solid foundation for your investing activities.

There are four primary factors that affect the price of oil and related products worldwide. These factors include:

Demand
As with any commodity, one factor that dictates price is demand. The world demand is around 90 million barrels per day for crude oil. Many countries have fuel subsidies for their residents. This can be good or bad. It’s especially bad when a company is forced to sell at a loss.

Supply
Supply has an effect on price. Supply is usually kept slightly below demand by about one million barrels per day.

Forbes, Editor: Jay R. Young, January 27, 2021