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: Natural Disasters
Natural disasters are another factor that can cause oil prices to fluctuate. For example, when Hurricane Katrina struck the southern U.S. in 2005, affecting almost 20% of the U.S. oil supply, it caused the price per barrel of oil to rise by $13. 5 ﻿ 6 ﻿ In May 2011, the flooding of the Mississippi River also led to oil price fluctuation. 7 ﻿
The COVID-19 pandemic is another example of a natural disaster, but unlike nearly all other natural disasters that raise the price of oil by creating a supply shock, the COVID-19 disaster created a demand shock. Many flights—both international and domestic—were canceled on orders of governments to close borders. As a result, gasoline consumption in the U.S. fell off a cliff. The United States consumes almost one-fourth of the world's oil. 8 ﻿
Consequently, gasoline refiners didn't want to take oil that they couldn't process for sale, and oil reserves began to pile up at the WTI storage facility in Cushing, Oklahoma (where oil is stored for delivery in the U.S). In response to the crisis, major oil producers sidelined production. Political Instability
From a global perspective, political instability in the Middle East causes oil prices to fluctuate, as the region accounts for the lion’s share of the worldwide oil supply.