Title: What Causes Oil Prices to Fluctuate?
Headings: What Causes Oil Prices to Fluctuate?
What Causes Oil Prices to Fluctuate?
Key Takeaways
OPEC Influences Prices
Supply and Demand Impact
The COVID-19 Demand Shock of 2020
Natural Disasters
Political Instability
Production Costs and Storage
Interest Rate Impact
Article Sources

Content: For example, in July 2008, the price of a barrel of oil reached $128 due to the unrest and consumer fear about the wars in both Afghanistan and Iraq. 9 ﻿
Production Costs and Storage
Production costs can cause oil prices to rise or fall as well. While oil in the Middle East is relatively cheap to extract, oil in Canada in Alberta’s oil sands is more costly. 10 ﻿ Once the supply of cheap oil is exhausted, the price could conceivably rise, if the only remaining oil is in the tar sands. U.S. production also directly affects the price of oil. With so much oversupply in the industry, a decline in production decreases overall supply and increases prices. In 2020, before the Coronavirus pandemic, the U.S. had an average daily production level of approximately 12.7 million barrels of oil. 11 ﻿ That average production, while volatile, can trend downward. Consistent weekly drops put upward pressure on oil prices as a result. Oil diverted into storage has grown exponentially, and key hubs have seen their storage tanks filling up rather quickly.