Have you ever wondered why oil’s price fluctuates more than the value of other investments?The biggest influence on oil’s price is OPEC, a consortium of 13 countries that controls 40 percent of the world’s oil supply. It affects oil’s price by changing production levels. For example, OPEC maintained 2014’s production level despite lower demand in Europe and China, which caused an oil excess and a fall in price from $100 per barrel to less than $50. Natural disasters are another factor. Hurricane Katrina affected 19 percent of the United States’ oil supply in 2005, causing prices to climb $3 per barrel. Production costs also change oil prices. Extracting oil from Middle East locations is relatively cheap, but oil from the oil sands of Alberta, Canada, is more expensive. Prices may rise if cheaper sources exhaust their supplies, leaving only the more expensive sites. Finally, political instability may affect oil prices. In July of 2008, oil’s price reached $136 per barrel when wars and unrest in Afghanistan and Iraq stoked consumer fears.
