Economic factors that affect petroleum oil prices include crude oil prices, geopolitical events and economic events. As of 2015, petroleum prices are also affected by the actions of OPEC.
The price of crude oil is the primary factor that affects petroleum oil prices. There are some minor episodes caused by local factors where petroleum prices vary from crude oil prices. However, under most circumstances, their prices fluctuate at the same time.
Geopolitical upheaval disrupts the physical flow and distribution of crude oil to refineries. Considering a large percentage of the world’s oil is located in regions with a history of political instability, economists watch those regions closely and look for disruptions to determine future pricing. Geopolitical events include war, violent changes in government and major terrorist activity.
Economic events affect crude and petroleum oil prices by disrupting the chain of supply and demand due to the uncertainty of future markets. Economic events include embargoes and financial crisis on a national and global level.
OPEC is the acronym for the Organization of Petroleum Exporting Countries. They are a global organization whose purpose is to manage the world’s supply of oil. They control 61 percent of the world’s crude oil exports, and hold 80 percent of the proven oil reserves. Because of this, OPEC’s decisions profoundly affect the price of crude and petroleum oil prices.